Vertical smile is a slang term for the female genitals. The vagina and vulva can both be referred to as vertical smiles.
The term vertical smile references the way that the labia, or vaginal lips, looks similar to the lips on a face that form a smile. However, unlike the lips on the face, which run horizontally, the lips of the vagina have a vertical orientation. That's why the female genitals are called a vertical smile.