Search for the many threads for all the details. Has been asked and answered many times. The short answer is each blackberry has a unique PIN number. You can send a message to another blackberry using the PIN (from messages, open menu, select compose PIN), or use blackberry messenger. The message is transmitted via data.
PIN messages are between two Blackberry devices and are instant and very secure. To me they are the most dependable communications between two devices.
SMS can be between non RIM devices and can take long periods of time to get from one device to another. Sometimes they never get there. They are not near as secure.