Somehow Neo and Smith are now connected, they can sense each other. Agent Smith was the only person to survive the attack on Zion, and is also in a coma at the end of the movie along side Neo. I believe Smith survived doing the same thing Neo did to the machines. I think Smith wanted out of the Matrix so badly (think back to the interrogation of Morpheus) that he managed to rewrite parts of his own program, and kept existing despite Neo decopiling his program. I think ultimately, it was this that will be the downfall of the machines, they did not anticipate Smith developping that urgency for freedom and now both he and Neo can destroy the machines. He wants to destroy the humans as well though. Remember, he hates humans, they are a virus, he also hates the Matrix because he was trapped in it. It seems as though he wants a worls free of humans, and therefore free of the matrix.
The other thoery is that they are all still in the Matrix, and they were again lied to. Remember Neos power was deliberately given to him so that eventually he would be led to the architect, it was all done by design. It's possible the matrix has layers of "truths" so that should any human suspect and become free, they will never truly awaken from the Matrix. Neo views the Matrix in green numbers flying around, but maybe he doesn't view the "outside" part of the matrix that way. This really added to the movie for me.
Special effects, some scenes sure looked like CG, but try to think of any other fight scenes as fun and cool as these were. The movie was essentially perfect.
