Could it be that you are using touchpad to scroll? Or maybe you are on macOS?
At least in VSCode and probably some other software (especially if it's electron based) scrolling using touchpad gesture or other device that provides "smooth scrolling" (for example a thinkpad trackpoint) is always smooth similar to how when you drag the scrollbar with mouse.
VSCode "editor.smoothScrolling" has an effect when you scroll using scrollwheel. Typically turning the mousewheel by single indentation scrolls by some fixed amount of lines ~3-5 depending on configuration. When "editor.smoothScrolling" is off this scrolling by instantly moving everything up.
When "editor.smoothScrolling" is on as the description of this setting explains it plays an animation which moving the in as small increments as screen resolution and screen refereshrate allows. It's only a fraction of second, but since most screens now are are at least 60hz that's still 6-20 frames.
Different aspect of smooth scrolling (which is what similar named setting in other software might affect) is how the scrolwheel events are handled and reported. Typical mouse wheels rotate have physical detents making them spin with 15° steps, or 24 steps per revolution. And for a long time corresponding wheel events happened at roughly similar rate/resolution. Even if some the libraries were written with future proofing in mind that doesn't prevent applications and wrapper libraries making bad assumption about these values. For example windows API used to report values in increments of 120. That in theory supports wheel events with resolution down to 15/120=0.125°. But since for a long time the numbers it reported were always multiple of 120, a bunch of software did something like this `int scrollAmount = wheel_change / 120`. Thus throwing away information about scrolling at steps smaller than 120.
So a smooth scrolling can also refer whether everything in the software stack between software/input library/os API/driver correctly handles high resolution scrollwheel events.