It is actually steam, not smoke, that is released. Condensation causes there to be small amounts of moisture within the scone. Heating the scone in the microwave turns the water into steam, and the steam is then released.
The butter in a scone dough is what makes the final scone light, airy and crumbly. Without butter the mixture would be flour, milk and salt, which would create a brick-like scone (more like a slightly risen cracker/water biscuit, really).