Duncan has just been murdered and his sons are watching people weep and wail as if the loss were too great to bear while their own tears remain unshed--they are too shocked and too vulnerable to give them liberty. They suspect that someone in the castle is responsible, and they have reason to mistrust (and fear) everyone that they thought were "friends." There is no way for them to know who the murderer is--especially since Macbeth has just killed the sleepy (drugged) blood smeared "murderers" in a fit of righteous rage (or so he claims). We know otherwise.
My reading of this line is that the "daggers in men's smiles" suggest that the people will smile to their face but those very smiles could kill them. Duncan, their father, was not a good judge of character. He even admitted that, saying of his misplaced faith in the original Cawdor that "there's no art/ to find the mind's construction in the face". In contrast to their innocent father, Malcolm and Donalbain understand that some people may appear friendly but have evil intentions.
In the context of Donalbain's other words, it seems clear that he means that they are unsafe in present company. He refers to the necessity of separation to ensure their safety and, immediately after the dagger reference, says that the "nearer the blood, the nearer bloody" (which I take to mean that he is aware that the closer he stays to this place where his father was killed and men smile daggers, the more likely he is to be killed himself.