Two-cycle engines produce smoke because they mix oil with the fuel to lubricate the engine's moving parts. This oil is burned along with the fuel during combustion, and the smoke is a byproduct of this process. Low-smoke engines use various techniques to reduce the amount of oil that is burned, such as using a more efficient fuel injection system or a different type of oil.
Some two-cycle engines also use a process called "direct fuel injection" (DFI) which can help to reduce smoke production. DFI engines inject the fuel directly into the combustion chamber, rather than mixing it with the air/oil mixture. This allows for more precise control over the fuel burn and can help to reduce the amount of unburned oil that is produced.