Is iMessage missing something?

There's been quite a hubbub over iMessage basically competing against all the other group messaging apps that have come out recently but I can't help but completely miss the point of it (and other) apps. Am I missing the point that it does not do SMS? Or does it and they don't say that?

Seems to me that the perfect messaging app would be one that does all that the group ones do but also do it via SMS texting. Not everyone has an iPhone/Android/Smart/Feature phone. I believe the SMS market (no stats to prove this) is MUCH bigger and fail to see why no app also does SMS as well. Wait... one does. But it's on Windows Phone Mango. And they also have speak to text.