Yes, in Europe Chip-and-PIN cards are the norm - the card has an embedded microchip which the reader communicates with electronically. But they still have the magstripe as well, for backwards compatibility.

Yes but I have yet to see an ATM anywhere that uses a chip reader slot, they all pull in the card in the same manner as a magstripe ATM (if they use the chip internally, I do not know).

The smart card I have requires only a PIN, and that PIN can be intercepted by suitable hardware can it not?

I've heard of pinhole cameras being used in card skimming operations where PIN numbers are required.

That doesn't do anything for a chip and pin card. You need the chip too.

Here in the uk they skim your card, create a replica and use a pinhole camera to get your pin.

As far as I know, you can't skim the chip. In the EMV system, the private key is only accessible to the internal "CPU", not the reader.

Isn't the whole point of the "smart" that the card is difficult to replicate and must be present?

Yes that's true, I was thinking of the case where we assume the card is stolen.