"Smartphone" was originally a Microsoft coinage intended to refer to devices running Windows Mobile, which were in many ways closer to modern smartphones than to feature phones: they had large (for the day) touch screens, could run sophisticated apps like a Web browser or a cut down version of Office, etc.
"Feature phones" were at one point the high end of a carrier's phone lineup, as they offered features, such as music playback, a camera, or WAP internet access, that a basic phone did not. Usually they could only run very limited applications, written in things like Java ME, that were available for sale through your cell carrier. When the iPhone was released, feature phones became the new low end. (Pre-iPhone smartphones were quite rare, usually being carried by on the go execs and the like.)