For those who don't know:
Ultima 4 (Yes, I know the screenshot is of 5, bear with me) is structured in an interesting way; rather than being about defeating a Grand Evil that threatens the world, instead your objective is to embody eight virtues and then go into the Grand Stygian Abyss (= Big Final Dungeon) and find and retrieve the Codex of Ultimate Wisdom from within it. As you proceed through the final dungeon, you are tested on the precepts and concepts that make up the system of virtues, culminating in a final series of questions and a big final question where you have to piece together all the little bits of information picked up throughout the game.
Smith is a talking horse. In Ultima 4, he was meant to give you a key clue to finding out that Big Final Answer.
Unfortunately, due to an oversight, the programmers failed to program in that conversation tree. Smith was a fun character to encounter, but little more than that.
Wind forward to Ultima 5, and Smith reappears - and this time around, his conversation revolves around him being apologetic for having forgotten to tell the Avatar something important, resulting in the screenshot above (That's the answer to the Big Grand Question, albeit written in the runic script used elsewhere in the game).
Smith was kept on as a running gag - in each game he'd give you a hint for the *previous* game. In his final appearance - Ultima 7 part 2 - he'd appear in the Dream Realm, and give you a hint for the final puzzle in Ultima 7. You'd tell him that's no longer of use, and he'd apologise, and just as he's about to give you a hint for the current game... he'd wake up, and vanish from the dream realm.
In a gloriously circular fashion, Ultima 9 doesn't have Smith in it (all horses have been killed), but does have a message from him, hinting at the secret behind the isle of Pagan from Ultima 8...
...which once again, cannot be correctly triggered.
