I downloaded smarty to test out for our websites at work, and was immediately impressed. It was easy to implement, easy to learn, and very, very powerful. Just when I thought, "nah, it couldn't do that...", it did it. Want to use PHP objects? No problem. Loop through an array? Piece of cake. Import one template into another through variables? Just say the word. Truly amazing.
The other gripe: that I didn't find this program six months ago.
If you're a webmaster who deals with a large site based on templates, do yourself a favor and check out smarty. You'll love it.