As far as I know, install the mod up to part 4, then...
skin1/modules/Smart_Search/smart_search.tpl
Change...
Code:
<input name="q" type="text" value="{$searchstring|escape:'html'}" size="50" />
To...
Code:
<input type="text" name="q" class="text" value="{$lng.lbl_search}" size="50" onblur="if(this.value=='') this.value='{$lng.lbl_search}';" onfocus="if(this.value=='{$lng.lbl_search}') this.value='';" autocomplete="off" onKeyUp="ajax_showOptions(this,'getProduct',event)" onBlur="this.form.submit();" />