It is to go with a responsive design. Why?
(1) One URL makes it easier for your users to interact with
(2) One URL makes it easier for Google's link algorithms to work with
(3) One URL and same HTML makes it easier on crawl efficiency so Google can better crawl more of your site
Does this mean the only way to succeed in mobile SEO is to go the responsive route? Absolutely not. Google says they also do support the dynamic serving method with either the same URL or a different URL. But if you do go those routes, Google is asking for some help in understanding the dynamic device specific HTML.
(1) When you use the different HTML approach but the same URL, Google wants you to use the HTTP Vary Header as a hint for GoogleBot-Smartphone to crawl the site.
(2) When you use the different HTML approach but a different URL, Google wants you to use a rel=alternate on the desktop version and use a canonical on the mobile version.
This can get very technical and I went into more detail on this at Search Engine Land.
Google has created a micro-site to help developers implement these three methods. You can find it at this URL.
If you are considering making your site mobile SEO friendly for smartphones or if you have a site that already is, read these documents, and discuss each approach with your developers.
I know I will be having a meeting in my office to review our practices and make sure all my developers are on the same page on mobile SEO tomorrow.
For our earlier posts on Google Mobile SEO, scan the Google Mobile section.
Forum discussion at Google+.