Re: Chips ahoy
Great question. The short answer is that the attack could still have succeeded. That's because the type of malware tied to the Target breach scraped the POS device memory, which must handle acquired data in plaintext format.
So an attack against a region that uses the smartcards to which you refer -- known as EMV, and branded as "chip & PIN" in the UK and Ireland -- would theoretically have been able to steal cardholder data.
But attackers or buyers of the stolen card data would not -- I believe -- be able to use this data to create fake cards for making in-person purchases or withdrawals. That's because POS systems are programmed to not accept "swipes" for EMV-compatible cards, as a fraud-protection measure. As a result, attackers would also need the four-digit PIN code. (That said, one risk is that attackers could rewrite the firmware on the EMV-compatible POS device itself. But that's a different scenario.)
Would-be fraudsters with EMV card data could still use the data for online or remote purchases, provided that additional defenses weren't in place. Some European banks and card providers, for example, require that cardholders register a secret word (say, FOOTBALL), and then ask for specific characters of that word to be used to authorize any online transactions (such as asking for 1st, 2nd, and 5th characters of the secret word, so F+O+B, on one instance, and a different set of characters the next time).
So like all types of security, the more layered the defenses, the better the likelihood of preventing these types of attacks.