"A madman, cruelty and chivalry all jumbled up together, but he did not know the meaning of fear."
Well, that's get that nightmarish image out of the way first. Although a fan depiction as opposed to an official image of the character, that's still scary as hell, and would probably result in victories just by virtue of the terror instilled in opponents.
The Smiling Knight - whose real name is unknown - lived before the events of the series, in the time when Jaime Lannister was around 16-years-old. He was an infamous outlaw of the Kingswood Brotherhood, a group who operated during the reign of Aerys II Targaryen, and gained notoriety for kidnapping nobles and avoiding capture.
Eventually Aerys sent soldiers to take care of them, including Arthur Dayne, Barristan Selmy, and Jaime himself. The young Lannister briefly clashed with the Smiling Knight, before Dayne took over. The two fought an extended battle until the Knight's sword broke, at which point Dayne allowed him to get another, and then eventually killed him.
The sheer fact he was able to stand toe-to-toe with Dayne is a sign of his skill with a sword, and Dayne's defeat of him is considered one of his greatest achievements. The Smiling Knight is remembered as one of the most feared men of his day, and as Jaime recalls: "The Mountain of my boyhood. Half as big but twice as mad."