Yes, the smoke generators were meant to screen the PT boats as they withdrew. Most medium to small naval combatants either had smoke generators or could at will increase the amount of smoke coming from their stacks. They were defensive in nature. It would be cool (though the FPS issue probably makes it impractical in the game) if the CVTG commander could order the DE escorts to generate smoke, to shield the TG from shore batteries or enemy naval gunfire. Just turn the fleet away from the threat and order smoke. It wouldn't be as helpful to shield from attaching A/C, but could gain you some time against an enemy fleet.