The title "Smoke Gets in Your Eyes" is an actual song, by the Platters. The lyrics deal with lost love and wishful thinking, both of which apply to Holden's current mindset at the carousel:
"They said someday you'll find
All who love are blind
Oh, when your heart's on fire
You must realize
Smoke gets in your eyes" ("Smoke Gets in Your Eyes").
In many ways, the song complements the action of this scene. Holden is overcome with emotion watching Phoebe ride the carousel, and the song is a mixture of feelings as well, about losing love and trying to put on a brave front. Holden probably can identify with the lyrics of the song in this moment, because his entire trip to New York has focused on attempting to meet his need for companionship and understanding and his many failures in trying to achieve either.