To escape reality ,,, some ignore it or even do drugs to help Noodles's final smile is about being submerged into a dream and away from reality. This is the same reason drug addicts use drugs. To escape from reality.
He meets his old friends who is now Mr Bailey , he hears him out but basically ignores the new reality presented to him. He continues to call him Mr Bailey even after knowing who he is. The new reality is too painful for him to see.
So he refuses to take any part in it. When James woods shows him the gun, noodles then has nostalgic views of their childhood friendship in NYC. After he comes back from the dream he tells Mr Bailey that he can not kill him.
Mr bailey asks him if this is his way of getting back at him. Noodles then say " no it is just the way I see things "referring to their old friendship and not seeing the present new reality. It is almost a choice to face the pain or ignore it by submerging into a different dream. To escape the painful reality. Just as are drugs. A choice to escape.
That is why the final scene is one of him doing drugs or escaping into a different reality to avoid pain. The smile is the representation of escape and ignoring realities of life by being stoned.
He leaves the house and then he watches Mr Bailey come out and disappear behind the truck. He may have killed himself / or perhaps he did not. But what matters is noodles's reaction to it.
He calmly watches the truck go by him until the red rear lights of the truck become foggy and change into the front lights on a incoming car of bunch of strangers partying. They are unrelated but he looks at them with the same exact calm face as he did to the truck as if the 2 events are of equal significance. At least to him they are. He has escaped that reality and his old friend disappearance is as trivial to him as the partying people.
But the choice of seeing things differently is also a representation of something else. Or just the intrinsic part of people. How and who we are as individuals. How we react to things in life. Where that betrayal of a lifetime was easily done by Max, noodles cannot accept it in anyway. He sees them as a family that has been shattered. He can ignore it by being high and denying reality.