How does smoking really affect the lungs?

Very negatively! Smoking kills the hair cells (cilia) that sweep mucus from the lungs, deposits tar that turns lungs from pinkish to black, causes inflammation that damages the delicate membranes of the lung causing asthma, emphysema and chronic bronchitis, and harms immune cells making the lungs more prone to infection. The chemicals in tobacco damage the genetic material (dna) in your lungs causing cancer.
Multiple toxins. There are multiple toxins that cause damage, even at the molecular level, that can lead to emphysema or cancer.