With each of the reader email templates, you can set custom From Name and Reply To fields. In the SMTP configuration, you also set a Send From Name and Reply To address.
When SMTP for reader emails is enabled, the SMTP Send From Name and Reply To address are used as the defaults.
So when the From Name or Reply To fields in the email template are left blank, the SMTP's Send From Name and Reply To settings are used. When the From Name or Reply To fields in the email templates have values entered, those values are generally used instead of the SMTP settings.
Some SMTP providers don't support separate Send From Addresses or Send From Names. In those cases, emails sent via SMTP will always use the address and name specified in the SMTP configuration, rather than what's used in the Readers > Settings email templates.
For example, let's consider this set-up:
The Reader Welcome emails will appear as coming from Linus Owl, and the Reply To address will be firstname.lastname@example.org.
But the Reader Password Reset emails will default to the SMTP settings, so they'll show as coming from QA Cheesetopia with email@example.com as the Reply To address.