Though there are many settings on a modern blender, the appliance has two specific functions: to chop things up and to mix them together. The settings help you determine how finely chopped you would like your ingredients and how well you want them mixed. In the past, many people would use the puree setting when making smoothies, but many newer models have a new setting specifically designed for making smoothies. So what is the difference?
The puree setting is created for use when blending ingredients together to go into soups, sauces and other entrees. Generally the only things that are added are vegetables or fruits, which are soft and easy to cut through, but need to be blended together and very finely chopped.
This setting is great if you want to make juices as well, even though that could also fall under a smoothie. It will mush the fruit up enough that you will be able to easily use cheesecloth to separate the juice from the pulp.
Most smoothies require ice, and the smoothie setting is expecting it. The motor will run a little more powerfully to break up the ice and other smoothie ingredients as it mixes and blends the drink together. It is also good for mixing hard ice cream as the setting is very powerful and will easily break up every chunk before it melts.
Though the settings can be interchangeable, there are small differences that would make it easier to use one over the other. Use the one that is most appropriate.