We see Spike smoke in Buffy the Vampire Slayer on many occasions
We learn in the final Episode of Season 1 of Buffy that vampires can't breathe. Does that mean that Spike can't absorb the nicotine in the cigarette and get a nicotine buzz?
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Spike appears to enjoy smoking on more than just a psychological level, at least according to the show script for Fool for Love:
[He strikes a white-tip match off the pool table, lights the cigarette, savoring the first puff, and grins at Buffy through a cloud of exhaled smoke.] - Buffy: Fool for Love
Beyond that, there's not a lot of extra background (and nothing within the show) that specifically explain why he smokes and what he gets from it.