The SMTP server is looking for a SMTP host/gateway to send the mail to.
If you are trying to send to localhost, then the localhost ip would be the gateway
else if you are trying to send to an external email address like gmail or hotmail, you will need to add your ISP's mail gateway as the smart host
To set up a smart host
1.
In IIS Manager, right-click the SMTP virtual server, and then click Properties.
2.
Click the Delivery tab, and click Advanced.
3.
In the Smart host box, type the name of the smart host server. You can type a string to represent a name or enter an IP address.
4.
If you want the SMTP service to attempt to deliver remote messages directly before forwarding them to the smart host server, select the Attempt direct delivery before sending to smart host check box. The default is to send all remote messages to the smart host, not to attempt direct delivery.