The present participial (participle) is formed from the verb stem normally by adding -ing to the infinitive with some variation based on the final letters of the stem. Thus to smile becomes smiling. The participle can act as a nonfinite verb, adjective, noun, or as part of an adverb clause. [The Chicago Manual of Style]
Some examples:
Smiling is good for you. – Noun [Gerund]
I love to see your smiling face. – Adjective
Joe ran from Melissa, smiling as he went. – Nonfinite verb [Joe was smiling]
She was grinning, smiling even, as she walked up to the podium. – Participle phrase being used as an adverb
But what about:
I said, "Look at those two smiling over there!"?
Best Answer
I see "smiling" differently in your examples:
Smiling is good for you: verb interpretation preferred (cf. "To smile is good for you"), but noun interpretation can be forced by adjectival premodification, as in "occasional smiling")
I love to see your smiling face: verb pre-modifying the noun “face”.
Joe ran from Melissa, smiling as he went: verb heading the clause "Smiling as he went" as predicative adjunct with "Joe" as predicand.
She was grinning, smiling even as she went …: verb (coordinated), part of present progressive aspect.
And your question: Look at those two smiling over there: verb as head of subordinate clause "smiling over there", modifying the NP "two".