Social media optimization (SMO) refers to the process of refining a website (optimizing it) so that it's awareness and content are easily spread through social mediums and online communities by users and visitors of the website. This can include anything done "on-page" such as improving the design and usability of the website so that it becomes more compelling to users, in an effort to help them spread it through social media sites.
The simplest example of SMO is represented by all the "digg this" and "add to delicious" icons and links that are all over the web today.Such optimization includes adding links to services such as Digg, Reddit and Del.icio.us .
Social media marketing (SMM), plays more of an active role in relation to social media by referring to the creation and distribution of content and other messages through the social web by some form of viral marketing. This can be anything from creating compelling content that gets bookmarked and even hits digg's homepage to spreading a viral video by putting it on YouTube and other social media websites.
It's about the things that are done off-site, for example, participating in online communities where your customers hang out would be an active role that falls under SMM. Social Media Marketing is all about collaboration between people. It is about participating with everyone and sharing information.