1. Meaning, "to smoke crack" in present tense; 2. To refer to another's actions in an extreme manner (can be used in either negative or positive connotation).
Fred: Hey, how come Bill always manages to get a 50 killstreak on Modern Warfare 2?
Jim: Dude, I don't know. I think he's smoking crack.
OR
Jason: Hey, is Mark coming over to smoke some happy grass with us tonight?
Ted: No, he said he's staying home tonight and smoking crack instead.
Expression exclaimed out of frustration or elation. It also may be used as a derogatory adjective or noun, such as: "Hey Guerry, you crack-smokin', juju bean eatin' booboo!"
Acting like a complete idiot. Presumably "the blue crack" is Drain-O Crystals. "Have you been smoking the blue crack?" is thus analogous to "Have you been drinking turpentine?"
Note that this usage pre-dates the use of "blue crack" as slang for Tylenol PM.
"A customer asked me today if I could see her computer screen through the phone. I asked her if she was smoking the blue crack."
Nickname given to bales of marijuana thrown overboard or out of airplanes. Origin is reportedly from members of the US Coast Guard in the area of Southern Florida.