First, you have to have 6 units under your control. If you press Square, it will list the units you currently have. Some missions will start you with a free unit, which makes this a bit easier.
Purchase or acquire a total of 6 units, then during a firefight press X to bring up your countermeasures. Select the left side option to deploy a smoke screen. Make sure to place it right in the middle of your units so they are ALL covered by the brown circle.
Its easiest to cover all 6 units when they are making a turn on a road, this bunches them together a bit rather than having them all in a straight line.