It turns out the word smart in the title is pretty accurate:
The Smart Cover has one magnet that turns off the iPad 2’s screen. The rest are used to either clamp to the iPad on the right side (the far-right column of magnets), or to form the triangular shape used to create a stand for the iPad 2.
All in all, there are 21 magnets, some steel plating and some plastic plates inside the Smart Cover. Only one magnet is used to trigger the iPad 2’s sleep sensor.
Four magnets are present in the iPad itself, pulling the Smart Cover to its proper position using alternating polarity, making it just about impossible to put the Smart Cover on incorrectly.