In The Outsiders, when Ponyboy says Dally is "smart," what might he mean?    

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I think the description of Dally that we are given in the first chapter is worthy of some serious attention as it presents us with a very complete description of the individual. Let us examine the part you are referring to:

He had quite a reputation. They have a file on him down at the police station. He had been arrested, he got drunk, he rode in rodeos, lied, cheated, stole, rolled drunks, jumped small kids--he did everything. I didn't like him, but he was smart and you had to respect him.

Thus we can see that the adjective "smart" that Ponyboy applies to Dally is probably not linked to intelligence in the traditional sense of the word. Rather, it seems that Ponyboy is using "smart" in the sense of "street-wise." Dally with all of his "experience" of the world and the law is clearly someone who knows about how to manage situations such as the one facing Johnny and Ponyboy. It is interesting that it is Dally who is able to help them out with what to do and where to go and gives them advice. He is obviously no stranger to such events.

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