Here’s the original source image for the smiley face: http://blogs.herald.com/.a/6a00d83451587d69e201156fb82331970c-800wi . It’s possible that the guy in the picture printed out that image (or the same image from the original clip-art source) and cut it out badly to make his sign, but it looks like Photoshop to me. I could tell better with a higher-resolution image.
Oh please, give me a break. It’s a Reuters photo, why would they photoshop that? It’s not like it’s hugely disturbing.