[blatherard]

As I understand it, Einstein was arguing that quantum theory was basically incomplete. That it provided a statistical view of unknown, underlying deterministic processes.

To say that properties "have been smoothed away" means that the particular statistical measures that quantum theory was using were losing the fine-grained detail necessary for understanding particular events. It's not that the "quantum wave" is literally smoothing things in the world, but that the theory of the "quantum wave" is disregarding particular facts.

Imagine that we described human populations without having the ability to observe individual sex characteristics, or individual human interactions. We might say things like "a human has a 10% chance of splitting into two humans over the course of a 20 year span." In this case, our statistics "smooth away" differences such as sex, and the interactions of specific humans over time, leaving us with a probabilistic statement. We might start reading the apparent non-determinism as a fact of nature, rather than as a problem with our knowledge.