graham, you da man

O.K. people..........You guys are making this a lot harder than it really is.  First of all, Revolutions is the best one of the three installments (badass machine battles, constant action, and sick fight scenes). 
You haters go into the theatre always expecting each sequel to totally upstage the previous one, or you call it a disappointment.  The only reason you all think that the first one was better than the others is because it was the first time you had seen a movie that is as mind blowing as the concept of the Matrix.  Step outside of the box and realize that if Revolutions would have been the first one to hit the theatres, you would have been more blown away by it than the first one. 
Yeah, you might have been lost, but the action and graphics were insane in Revolutions as compared to the original.  And...for you idiots out there that cant figure out the ending and were left "confused", it is pretty simple if you know anything about computer programs....so listen...
Smith was a artificially intelligent program, like the others (the oracle, the architect, and the "French Man").  As you should know by now, he figured out how to infiltrate other programs in the matrix by slamming his hand into the "body" of other people in the Matrix, thereby altering their "code" and turning them into a clone of himself.  It is as simple as you pulling up the software code for a program, changing a few lines of text, and making the program act or become whatever you want.  Smith figured out how to change the "coding" of those in the matrix to make them into another Smith.  It is just like building one program that cracks into another to alter it in any way you want.
Now, knowing this, here is the simple explanation of the ending....
When Neo makes the deal with the "Source" of the machines, the Source gives neo the option of peace if Neo can keep Smith from infecting all of the other programs in the Matrix, which would render the source incapable of controlling any programs from outside of the matrix.  In other words, the Source realized that it needed someone (a human) to be plugged into the matrix in order to stop Smith. 
This means that Neo, once converted into a program and placed into the matrix (becoming a program is the only way that everyone is "plugged into the matrix", no real people are actually in the matrix) can be used by the "Source" to stop Smith. 
In order to stop Smith from taking over the whole system of the Matrix and infecting every program inside of it, the "Source" had to insert a VIRUS into Neo when he was placed in the Matrix.  So, if Neo beats Smith in the fight, which can't happen because there were millions of Smiths by then, then he would have to take on every Smith there and would be too outnumbered.  So, the genius idea here is that when Neo loses the fight and Smith slams his hand into Neo to "change" Neo's programming and turn him into another Smith, that is when the VIRUS is activated.  Keep in mind, all the Smiths are one program that is connected to the "original" Smith that he fought. 
So, the "VIRUS" was a program that was then actvated by Smith taking over Neo, and the virus altered the programming of the original Smith and caused him to undergo a self-destruction sequence, just like any other bad virus in any other computer program that you know about.  This was the only way to stop Smith from taking over, and that was by inserting the VIRUS into Neo which was activated to destroy Smith once he took over Neo's body!  This caused a chain-reaction of infection to all the other Smith programs that annihilated that program from the Matrix.
This was GENIUS, yet such a simple concept if you think about it. 
Don't try to argue, this is right, and just makes too much sense to not be the best answer you have heard to how the ending happened the way it did.

In return for sacrificing himself (because it was Neo's idea...they just didn't show it in the movie...and Neo was the only one that Smith was after anyway) the machines decided to make a deal with him to allow the Matrix to continue to exist without Smith(keeping the Source alive and actively in charge) and also, in return,  keeping the people of Zion alive as part of the deal.

So...after all, Neo was "THE ONE" like was predicted all along, because he was the only one that could defeat Smith the way it happened in order to save Zion.

>>>>Sleep on it, and you'll agree with me........Later Everybody!

I seriously don't mind if you start throwing tomatoes at me but I had never seen any of the Matrix films until last night when I watched all three in a row. As you can imagine, it took a while to watch them and I was semi-conscious at the end of Revolutions so I cannot really remember the very end.

To me, none of the sequels could live up to the Matrix but I was really impressed with the battle in Zion. Extremely heart pounding and I loved it. What I didn't love was that my favorite girl was killed.