While S.M.A.R.T. certainly doesn't predict all failures, I worked in a computer repair shop for several years, and many times a S.M.A.R.T. error message was the first indication that a failure was about to occur, allowing me to save the customer's data before the drive died.
The technology itself does not stress the drive, it just keeps track of a number of indicators (full list here: http://en.wikipedia.org/wiki/S.M.A.R.T.) that could potentially lead to drive failure, such as:
- Read Error Rate
- Reallocated Sectors Count
- Spin Retry Count
- Uncorrectable Sector Count
- Power on Hours
The performance hit for S.M.A.R.T. is negligable, doesn't stress drives (the monitoring is passive), and can potentially warn you that you are about to lose all the pictures of your kids (or your MP3 collection or whatever is important on your Hard Drive).
In short, leave it on.