SMSSecure's default mode is to send normal, unencrypted SMS messages so people using regular SMS clients can still receive them.

If both users have SMSSecure, they can exchange keys and upgrade to an encrypted session.

Also, there's some amount of autodetection going on. SMSSecure will automatically prompt the user to start a secure session if it detects the recipient is also using SMSSecure.

But yes, if a user tries to start a secure session with someone who doesn't have SMSSecure installed, the recipient will just see a bunch of garbage (limitation of the transport).