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The final scene consists of the following elements:

1. Box geometry used for the smoke source.
2. Phoenix Fire/Smoke Simulator.
3. Phoenix Fire/Smoke Source emitting Smoke from the Box geometry.
4. Target Directional Light for lighting.
5. V-Ray Physical Camera for rendering.
6. PHXTurbulence for disturbing the smoke motion.

Create a Standard Primitives → Box. The box is used as an emission object for the smoke.

Set its Length / Width / Height to 3.0 cm / 32.0 cm / 3.0 cm.

Set its Length / Width / Height Segs to 1.

Position it to (X, Y, Z): (0, 0, 0).

Assign an Edit Poly modifier to the Box geometry and go into Face Selection mode.

Select all faces and give them an ID of 1.

Then, select only the top face which is used for emission of liquid and assign its ID to 2. This is the surface we are going to emit fluid from in the following steps.

Go to Create Panel → Lights → Standard and add a Target Directional Light in the scene. Enable the Atmosphere Shadows option in the Shadow Parameters rollout.

Exact position of the light is (X, Y, Z): (0, -41, 300).

Exact position of the light target is (X, Y, Z): (0, 0, 0) (targeted at the box).

Go to Create → Geometry → PhoenixFD → FireSmokeSim.

The exact position of the Phoenix Simulator in the scene is (X, Y, Z): (0, 0, 0).

Open the Grid rollout and set the following values:

• Cell Size: 1.0 cm;
• Size (X, Y, Z): (46, 24, 11);
• Container Walls → all Open;
• Adaptive Grid: Smoke; 
  The Adaptive Grid algorithm allows the bounding box of the simulation to dynamically expand when needed. With a Threshold of 0.02, the Simulator expands when the cells near the walls of the simulation bounding box reach a Smoke value of 0.02 or greater.
• Extra Margin: 5;
  The Extra Margin option is useful when the Adaptive Grid algorithm is unable to expand fast enough to accommodate quick movement in the simulation (e.g. an explosion). The Extra Margin attempts to remedy this by expanding the grid preemptively with the specified number of voxels on each side.
• Enable Expand and Don't Shrink - this way the Adaptive grid will not contract back when there is very thin smoke at the borders of the grid.
• Enable Max Expansion: X: (193, 151), Y: (98, 105), Z: (0, 189) to save memory and simulation time by limiting the Maximum Size of the simulation grid.

Go to the Phoenix Simulator → Simulation rollout and disable the Stop Frame Timeline. Set the Stop Frame to 120. Press the Start button to simulate.

As you can see in the preview animation, we have unwanted fire in the smoke.

Keep the simulation unchanged. Go to Simulator → Rendering rollout, click on the Volumetric Options, disable the Fire.

We still need to simulate the temperature so it would make the smoke rise up, so we don't disable it from the simulation via the Output rollout, but instead just turn it off for rendering.

Set the Smoke Color to light gray color (RGB = 245, 245, 245). Also, disable the Scattering.

Now the smoke appears too thin, so let's increase the Simple Smoke Opacity to 0.9 (found in the Smoke Opacity rollout).

Without re-running the simulation, here is the Viewport Preview showing the result of the simulation so far.

Our final goal for the simulation is a smooth, natural-swirling, cigarette smoke look. So all of the following steps aim at this goal. Now the smoke appears to be running too fast.

To slow it down, change the Time Scale from 1.0 to 0.7.

Create Helpers → Phoenix FD → PHXTurbulence.

Position to (X, Y, Z): (0, 0, 0).

Set the Strength to 40.0 and the Size to 2600.0cm.

Reduce the Fractal Depth to 2.

The Turbulence is used to bring more swirls in the smoke. You can use the Preview rollout's Force preview in order to see what velocities the turbulence adds to the simulation. Note that you have to turn off the GPU preview in order to see the forces.

Then go to the Fire/Smoke Simulator and run the simulation again.

Here is a Viewport Preview showing the result of the simulation so far.

As shown, set the Noise Type to Turbulence, Size to 0.8.

Noise Threshold High to 0.7, Low to 0.45.

Levels to 2.0.

For the Coordinates, set Source to Explicit Map Channel. By doing so, we can take advantage of Phoenix's grid Texture UVW. Also, set the UVW tiling to 2.0.

Here's a rendered animation so far.

Now, let's modulate the Smoke Opacity.

Set the Smoke Opacity to be Based on Simple Smoke.

Enable the Modulate option.

Keep the Noise texture that we used in the previous step and change the following settings:

Set the Size to 0.2;

Noise Threshold High to 0.5, Low to 0.45;

Levels to 2.0.

The images illustrate what the Modulation does when you modulate smoke with a Noise texture. On the left, we have smoke's opacity Based on Simple Smoke channel data. When Modulate option is enabled, and there is a Noise texture in the texture slot, it multiplies the Noise texture to create the final image on the right. You can think of it as if we are using a mask over the Noise texture in order to keep only the "islands" inside the smoke volume and remove the ones which are outside the simulated smoke. This is how you get this wispy smoke result. The key is having most of the Noise texture black and keeping only these high contrast spots in it, which are dragged along and stretched by the fluid.

Here is a Viewport Preview showing the result of the simulation so far. You can see that currently there is an issue in the video. Some smoke areas are appearing out of nothing during the animation. This is because as the fluid travels through space, it meets new "islands" of opacity and starts dragging them along. Which makes parts of the fluid suddenly appear.

Here is a rendered animation of the simulation so far.

To achieve a better swirling motion in the simulation, we can change the conservation mode and increase the Conservation Quality parameter under the Dynamics rollout. Set the Conservation Mode to PCG Symmetric, Quality to 50.

The PCG Symmetric conservation mode is ideal for smoke simulations or explosions because it tends to produce strong conservation which needs less conservation quality in order to look realistic. This method is also used for the Cigarette Smoke quick preset. So we choose this mode.

Go to the Fire/Smoke Simulator, and run the simulation again.

Here is an animation showing what we've achieved so far. You can see the better swirling and rolling of the smoke. The behavior is now more like that of a thin smoke.

Now, in order to make our animation more interesting, we can animate the Time Scale. This section of the tutorial is optional – you may skip to the Rendering section below.

To create the bullet-time effect, open the Dynamics rollout of the Phoenix Simulator and animate the Time Scale parameter as follows:

Frame 0: 0.7
Frame 100: 0.7
Frame 130: 0.3
Frame 145: 0.3
Frame 164: 0.7

The Time Scale is a global multiplier for the dynamics of the Simulator. Reducing it uniformly scales down all sources of velocity in the simulation.

Now we are ready for the final simulation. Go to the Phoenix Simulator → Simulation rollout and enable the Stop Frame Timeline. Press the Start to run the simulation.

Now that our simulation is ready, switch the Renderer to V-Ray Next Official Release.

Let's render the full sequence from frame 0 to 200.

And this is our final animation.