The ability to send short text messages from a phone. Both the phone and the carrier's network must support this feature for it to work.
Messages can be sent to other phones by phone number. Many phones also allow sending messages directly to e-mail addresses (requires network support, although this is very common).
Phones with MO-SMS also have MT-SMS, which is the ability to receive such messages.
Together, MT-SMS and MO-SMS form standard two-way SMS as found on most mobile phones.