Introductory Post here: http://www.shailen.sukul.org/2011/08/sharepoint-smart-server.html
To install this, simply install the latest WSP from the Download section
Once you do this, the HttpHandler will be available for use using the following syntax:
http://mysite.com/_layouts/SharePoint.SmartServe/SmartServe.ashx?filepath=Your file (css, js or image)
so an image might be referenced like:
<img src="http://mysite.com/_layouts/SharePoint.SmartServe/SmartServe.ashx?filepath=http://yoursite.com/lists/ImageLibrary/icon.gif" alt=""/>Note:
This release only supports serving files which reside in a SharePoint library. Future releases will also support files on the WFE, for example, in the _layouts directory. Please report issues using the Issue Tracker tab.