Emoticons are those small two to five character icons that use letters and symbols from the keyboard to create faces, hearts, or other recognizable shapes in order to convey how the author feels about what they are saying.

The most commonly used emoticons are fairly easy to identify.

and XD are used to express pleasure
and :`( are used for sadness
is used to point out jokes or inside references
<3 and @`~,~~ are used for romance

However, beyond general impressions, the meanings and use of the various emoticons has never been codified.

may show mirth, but it does not indicate the reason.

Emoticons Are Informal

Using an emoticon is the typewritten equivalent of drawing hearts and smiley faces on your letter.  If it is your intent to be quaint and informal, then use emoticons in moderation.  If you want a more professional image, they should be left out of your correspondence altogether.

That said, Twitter is something of an exception.  Because of the 140 character limit on each  post, Twitter is inherently less formal than other modes of communication.  Abbreviating concepts and web addresses is the norm within Twitter, and  the programmers have written the search function to recognize as the proper expression of a positive attitude and as the proper expression of a negative attitude.

While emoticons are not necessary within Twitter, but simple ones that serve to highlight commendations or complaints do have their place.

Use Sparingly

It does not take much to go overboard with emoticons.  One or two per message should suffice.  More than that and you either dilute their impact, or send mixed messages.