Wow, I think they surprised us all on that one - I don't think his name even appeared in any of the speculation leading up to the announcement.
I've never seen Smith in anything - his wikipedia entry shows a handful of television credits, plus what looks like a very solid theater career. I'll wager the guy can act. He's awfully young (finally overtakes Peter Davison as the youngest actor ever to play the role), and if I were feeling churlish I could complain that they've cast a (really) young skinny dark-haired white guy to replace another young skinny dark-haired white guy, which isn't the angle I'd have taken if I were casting the role. On the other hand, I think that we can all be really really grateful that Steven Moffatt is running Doctor Who instead of me, and so I'm going to keep an open mind and give this guy a chance.
A small sampling of online fan reaction seems to be overall positive, with predictable pockets of "Aaargh, he's too young" and the like.
Any readers out there actually seen Matt Smith in anything? What's he like? What do you think of this choice?