"Smart object" is a kind of "child" file embedded in its "parent" document. Elements+ allows you to create 2 types of smart objects - flat (non-editable) and layered (editable).
If you don't plan editing the contents of the created object, just select a layer in the Layers palette and double-click the "Flat Object" pictogram in the Effects palette.
To quickly create a smart object from several layers:
- Hide all unnecessary layers.
- Press [Alt+Shift+Ctrl+E] to merge all visible layers into a new layer.
- Apply the "Flat Object" action.
This simple operation enables non-destructive transformations of the layer contents. Even dramatically downscaled smart objects retain the original graphic data; which means that if you change your mind and enlarge it later on you don't lose the initial quality.
To enable non-destructive cropping, just convert the Background layer to a smart object (prior to cropping). Later on, you can easily get the hidden areas back by using the "Reveal All" command (screenshot).
On the other hand, most tools and commands are not applicable to this kind of a layer. If you try to paint over it with the Brush or choose a filter* from the "Filter" menu, you will be asked to "simplify the layer before it can be edited".
*Photoshop Elements doesn't support smart filters officially. Recovering this functionality is explained in the "Smart Filters" section.
Please keep in mind that this action merges converted layers to a single raster layer. This means, in particular, that after converting a type layer you can't alter its text any more.
To enable editing smart object contents consider an alternative conversion method.