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I came across this on the USAJOBS site, and mostly I'm curious, because it sounds like a fairly open-ended term to include on their "profile".
The ordering of the options on the site makes it unclear if this is a good thing to list yourself as or not, since it's right after High School Student. So I suppose there's really two questions here:
What do they mean by "Subject Matter Expert"?
As I understand the term it is usually used to describe someone who has an organisational role (developer, sales and marketing, line manager) which is itself a professional career, and a second area of expertise that is relevant to the industry they are in.
For example, someone selling Human Resources Software may be a software sales person, or a sales person who is also a Subject Matter Expert in HR, based (usually) on having professional experience within a given domain.
It's usually associated with the development of "expert systems" - that is to say system that apply for professionals with a given expertise, or are designed to replicate some of the knowledge that experts have.
I have a number of Subject Matter Experts in my team, in sales, development and support. For example, I have developers educated to BSc, MSc and PhD level in the particular technical/scientific field that we operate in, integrated with (and learning from) software engineers, and support/training staff who have 20+ years of experience in the main industry we support.
EDIT: I would expect an Subject Matter Expert to be an expert associated with software development, training, support, sales or marketing, who would have no difficulty in gaining mid- to senior- tier employment in their area of expert knowledge.
The USAJOBS interface has done themselves no favors by implementing the drop-down menu shown in the way that they have. It is confusing, in that "Student (High School)" is shoved in there near the end, when the rest of the drop-down items generally follow a career path. In that path, "Student (High School)" should be first in the list, instead of what appears to be a momentary/singular attempt to alphabetize the list.
The Wikipedia entry for Subject-matter Expert, or SME, gives an appropriate general description, which is a similarly appropriate starting point in answering the question posed here: "a person who is an expert in a particular area or topic". As other people here have answered, the definition of SME in their own organizations can differ as to the specific qualifications that need to be held in order to be granted the "title" of SME, so let's turn to the US Office of Personnel Management's glossary definition of "Subject Matter Expert":
An individual within a department or agency who is thoroughly familiar with a given topic and can provide expert input as to the appealing aspects of a job and the skills and other qualities required of a job applicant.
In the US Government hiring in particular -- and in other large organizations that have many levels of positions and require specific expertise -- "subject matter expert" is a sort of level of position much like we often hear "entry level" or "junior" or "senior". And, much like those levels, there's room for interpretation. Someone who holds a PhD may be well on their way to being a SME, but so might a person who has worked their way through the ranks for years, regardless of degree, who is in some way known for their good work, often externally.
Again looking at the US Office of Personnel Management's words on the subject, but again recognizing that this information is applicable elsewhere, here is an example of how SME's are used within the organization for use in job analyses for other possible position openings (SMEs are also used as stakeholders in projects, and just about anything else that you could imagine someone with a lot of information and knowledge could be used for within an organization, besides their own actual tasks; SMEs are often called in as participants in other projects besides their own):
The term subject matter expert (SME) is properly applied to anyone who has direct, up-to-date experience of a job and is familiar with all of its tasks. The person might currently hold the job or supervise the job. SMEs must provide accurate information and effectively communicate their ideas. SMEs should rate the job tasks and competencies for importance to successful job performance.
So, while in general use the term "Subject Matter Expert" can simply mean "the best person to judge specifics about something for which they have expertise" -- meaning, you could be the subject matter expert about cleaning the office refrigerator. In the context of labeling yourself a SME on a job application for the government or otherwise, it means you'd be easily recognizable as the top of the class, the cream of the crop, or another metaphor signifying that not only would you be able to walk in and be the expert on the topic (if that's what the job was looking for), you'd be able to judge the qualifications of others (if sitting on a hiring committee for which your domain expertise was valuable), and offer expert testimony, as Tanguerena mentions in this answer.
I would define a SME, in that context, as a technical or service professional with a good amount of experience but that does not have a managerial role or aspiration. This is the type of person that will minimal training in there field of field to get up to speed and contribute in a meaningful way in a new position. I would not expect this person to necessarily be an Expert on all aspects but rather someone that would know what they were talking about and could come up with solutions for the difficult questions.
Generally I would expect a person to have a minimum of 3 years of experience in their field though 20 years fits in just as well. They should be able to talk easily about the concepts and common issues faced. They should know how to get answers to to questions they do not know and have some contacts that can help them solve even the most difficult problems. If you do not then would classify you as entry level. If you have a junior management role like Team Lead, assistant manager, etc that is what I would classify as a mid career professional.
Generally, a "subject matter expert" is someone who knows the subject well enough to be writing books and teaching others. Many times, interviewers and recruiters ask you to rate your expertise on a scale of 1 to 10 - an SME would be a 10. Because USAJOBS is a US Federal Government jobs portal, I suspect that they're also looking for people who could satisfy the "expert witness" requirement in a Daubert hearing.
Judging from the types of titles on the list before it, I would say all formal levels are already covered. Thus, Subject Matter Expert has a little bit of an "Experienced, but no formal education" or "Self-educated" ring to it. That is, you are skilled in the subject, but may not possess a degree in it. Or perhaps you are without prior actual work experience, but still far more than "Entry Level" in the subject.
