To understand what an SMS Gateway is, you first need to understand SMS. SMS is an acronym that stands for Simple Message Service. SMS is a communication system that allows the exchange of short text messages between mobile phones (and other devices) using standard communication protocols.
SMS text messaging is the most used data application in the world today. SMS Text messages are limited to 160 characters, which became the size limit for Twitter.
The SMS Gateway allows messages to be moved in and out of the SMS communication system. A typical example of an SMS Gateway is originating a text message from email. SMS Gateways can also be leveraged for other applications. An example would be Google Mobile which allows you to lookup information using SMS. The SMS Gateway in this scenario would be the part of the Google application that looks up data in a database and returns it via SMS text message to the requester.