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When a sensor device is packaged together with a CPU, it is called a “smart sensor.” The sensors really become smart when the tight integration of sensing and processing results in an adaptive sensing system that can react to environmental conditions and consistently deliver useful measurements to a robotic system even under the harshest of the conditions. We illustrate this point with an example from our recent work on illumination‐adaptive algorithm for dynamic range compression that is well suited for an on‐chip implementation resulting in a truly smart image sensor. Our method decides on the tonal mapping for each pixel based on the signal content in pixel's local neighborhood.