I am considering Smarty as my web app templating solution, and I am now concerned with its performance against plain PHP.
The Smarty site says it should be the same
Based on my own experiences and informal benchmarks, Smarty doesn't by itself cause any major performance reductions. However, when you get into writing custom plugins, things go downhill.
A Smarty template is compiled & cached as PHP, but a custom plugin is always loaded and executed at runtime and is always slower than running the same code in a plain old PHP file. You're not going to notice this too much with a custom string formatting plugin, but you'll definitely see it when doing database queries in a plugin.
Overall, I highly recommend Smarty. Getting the display out of the PHP has made our code so much more readable and maintainable. You just have to make sure you're careful about what you put in plugins.