As @fradiger mentioned, this page has some good info on Schmoove Grooves.
The basic idea was to remove string friction by reducing the amount of surface area the string could touch. On a high wall yo-yo with a narrow gap, a schmoove groove could really reduce the amount of surface that a string could rub on while sleeping.
I first talked about the idea on an old yo-yo forum (probably yoyoing.com’s old forum). Then a year later, I asked @Feralparrot to mod a Anti-Yo Fluchs and some YoYoJam yo-yos to add the grooves. I liked them and decided to make them a main feature of The End when we were working on those.
The word Schmoove (or Shmoove) was a stylish way to say “smooth”. It was a common meme-y way of speaking back in 2006-ish, similar to how some people say “smoov” these days. The goal was to make yo-yos play more smooth, so “Schmoove” made sense. I think the original name I used for these was “Shmoove Rings”, but that changed over time.
It would be hard to prove how much the reduced surface area affects play, but there was one research paper that a yo-yoer wrote about the effects Schmoove Grooves had in generating extra air friction, which could then help in keeping a loop open during a slackacide. It was a dissertation written by a grad student who was studying aerodynamics, but the paper is no longer available. Hopefully some other folks can help find some of the 3D models and other cool yo-yo images from that paper.
When we shipped The End with Schmoove Grooves, I thought they’d start appearing everywhere. They look awesome, they don’t add significant cost to production, and I believe they work really well. But it took years for other manufacturers to adopt the idea. Anti-Yo produced a yo-yo called the YWET that had an added groove, but they said it was for putting in a second o-ring to increase response.
Another attempt at keeping the string from rubbing against the inner was was to create a “bump” where the bearing and response sit, so it isn’t flush with the rest of the inner wall. CLWY may have been the first to add that bump to their design. This bump sort of looks like a step from the inner wall to the response area, and it creates a gap similar to what schmoove grooves try to do.
I believe A-RT was the first yo-yo company to finally add Schmoove Grooves to their designs, and that’s when it finally started catching on. This is also where the size of schmoove grooves started getting wider and wider. When I was exploring the idea, I was nervous about what the gap would do, so I ony removed little bits of inner wall, then left a bit sticking back up, before another section was removed. You could say it was a tepid way of reducing inner wall. But after A-RT started exploring the idea, the grooves started getting bigger and bigger, with no little walls sticking up between them. This is how we finally ended up on the great big schmoove grooves (or “schwalls” as some people call them).
I might be wrong on a few details here, so feel free to correct more or help fill in gaps.