Smart (dynamic, floating) fees for the reference implementation wallet was pulled today:
https://github.com/bitcoin/bitcoin/pull/4250
... and should appear in version 0.10.
The estimation code only considers transactions that are broadcast on the network, enter the memory pool (so are available to any miner to mine), and then are included in a block. So it is immune to miners putting pay-to-self transactions with artificially high fees in their blocks.
Right now if you use the default fee rules your transactions will take 2-6 blocks to confirm:
http://bitcoincore.org/smartfee/fee_graph.html
The priority estimation code is even more broken; the reference implementation wallet will send a 56-million-priority transaction with no fee, which is nowhere near enough priority to get confirmed quickly:
http://bitcoincore.org/smartfee/priority_graph.html
(the smart fee code estimates priority, too).
Release notes from doc/release-notes.md in the source tree:
Transaction fee changes
=======================
This release automatically estimates how high a transaction fee (or how
high a priority) transactions require to be confirmed quickly. The default
settings will create transactions that confirm quickly; see the new
'txconfirmtarget' setting to control the tradeoff between fees and
confirmation times.
Prior releases used hard-coded fees (and priorities), and would
sometimes create transactions that took a very long time to confirm.
New Command Line Options
========================
-txconfirmtarget=n : create transactions that have enough fees (or priority)
so they are likely to confirm within n blocks (default: 1). This setting
is over-ridden by the -paytxfee option.
New RPC methods
===============
Fee/Priority estimation
-----------------------
estimatefee nblocks : Returns approximate fee-per-1,000-bytes needed for
a transaction to be confirmed within nblocks. Returns -1 if not enough
transactions have been observed to compute a good estimate.
estimatepriority nblocks : Returns approximate priority needed for
a zero-fee transaction to confirm within nblocks. Returns -1 if not
enough free transactions have been observed to compute a good
estimate.
Statistics used to estimate fees and priorities are saved in the
data directory in the 'fee_estimates.dat' file just before
program shutdown, and are read in at startup.