Mode: Edit mode
Panel: Mesh Tools (Editing context, F9)
Hotkey: W » Alt1 NumPad or CtrlV » 3 NumPad
Menu: Mesh » Vertices » Smooth or same option in Specials and Vertex Specials menus.
Smooth is quite an old feature. The recent Blender versions have a much more flexible tool to realize these sort of effects: the Smooth modifier. You are strongly encouraged to use it rather than the Smooth tool – some of the key advantages of the modifier are that he can be canceled at any moment, you can precisely control its intensity and the number of time it is applied, and even “inverse” it…
The Smooth tool tries to smooth your selected parts of the mesh, by reducing (flattening) sharp angles between faces and edges. Like the Noise operation described below, each time you press the Smooth button (or use one of the menu entries), a new “level” of smoothing is applied.
Real Smoothing versus Shading Smoothing
Do not mistake this tool with the shading smoothing options described at this page, they do not the same work! This tool modifies the mesh itself, to reduce its sharpness, whereas Set Smooth/AutoSmooth and co only control the way the mesh is shaded, creating an illusion of softness – but without modifying the mesh at all…