Couple of threads on this on this forum, I think. Maybe do a search.
I think the smoke pot idea has something to do with burning off the gases, and leaving only the good smokey flavor from the wood.
Your charcoal has all that stuff burned off already, right? It's just carbon stuff. Your chips have other stuff in them when they burn.
So, if you make a smoke pot, then the other stuff gets burned or trapped or whatever, before it gets to the food. Bitter flavors. Only the smokey goodness gets on the food. I think the idea is to put holes facing in such a way that the smoke has to get through the fire to get to the food.
Different smoke pots on here. Some are little tiny dutch oven thingies, about the size of a sugar bowl, made of cast iron, with holes. Or without holes. The people who do not have holes let the smoke sneak out between the lid and pot. The ones with holes sometimes seal up the pot (except the holes) with a flour/water dough/paste, to control how quickly the smoke escapes.
Another style of smoke pot is more of a pipe with holes. A pipe with capped ends (threaded), and holes on the length. All the same idea.
There are commercially made ones, or home made ones. Someone posted a link to a commercially available one, with many available flavors of wood to go in the little pot.
When the smoke pot or pipe is opened at the end of the cook, usually all that is left is charcoal - toss it on your cook for next time.