Hmmm...
There were three agents, Smith, Jones and Brown. Smith was the leader, but after Neo killed him (He didn't believe he could be killed, and couldn't handle it) he turned rogue, and instead of returning to the Source as the Matrix told him to for upgrades, he started acting like a virus, copying himself over everyone and multiplying. The new Jones and Brown, (Who obeyed the Matrix and returned for deletion) Thompson and Jackson, were upgraded with better combat abilities instead of being such accurate shots. In addition, a new leader was made for the Agent team, Johnson, to replace Smith. The new Agents were given orders to kill Smith on sight (as well as any Redpill)
Smith returned to Neo and explained that something happened when Neo killed him, and although he doesn't know what it was, he was compelled to disobey the Matrix and not return to the Source for deletion. He toook out his earpiece (severing his connection with the Source) and started acting like a computer virus. After copying himself over every single human and program (even Agents) in the Matrix, Neo returns to confront him. Only one Smith steps out from the billions to fight Neo, the one that had copied over the Oracle and had her forseeing powers. He explains that (having foresight) that "That's why the rest of me is just going to enjoy the show, because we already know that I'm the one that beats you." (This was evidenced earlier when, after Smith copied over the Oracle, the Smith/Oracle (with forseeing powers) started to laugh manically, implied that he is seeing his future victory)
After Smith beats Neo, he stands over him and starts to recall that "Wait... I've seen this... This is it, this is the end! Yes, you were lying right there just like that and I... I... I stand here, right here and I'm... supposed to say something..." In a moment of confusion, Smith reveals that he is merely following what the prophecy tells him he should do. In spite of his gaining the oracle's vision, he remains blind. He continues on, regaining his composure.
"I say... Everything that has a beginning has an end, Neo". This is the only time that Smith does not call him "Mr. Anderson" to his face, and Smith displays noticeable confusion after this, apparently not knowing what he has just said. This suggests that it is the Oracle within Smith and not Smith himself who speaks here. Unable to overpower Smith, Neo understands that he will never beat him in this way. He surrenders to Smith, who absorbs him, seemingly conquering his enemy.
However, Neo is directly connected to the Source (As the Machines themselves agreed to plug him in and cease war on the humans if Neo would defeat Smith, who threatens the entire Machine network) and being connected to the Source, when Smith assimilates him, it is linking the Smith program directly to the Source, allowing the Machines to send a massive energy overload through Neo into the Smith program to destroy every single Smith copy in the Matrix.
The humans that were copied over were freed from the Smith program copied over them. Then the Machines keep their deal and pull back all their forces from Zion, and then agree to tell humans about the Matrix, and if they wish, free them (I like to think in a more comfortable way than forceful ejection)
It is assumed the other Agents were deleted, no longer having to protect humans from the truth.
It is worth mentioning is that Smith was different from his Agent team from the start. While all Agents have personalities (Being A.I.) they still function in very mechanical ways. But Smith has an intense hatred for humans, (telling this to Morpheus after temporarily taking out his earpiece so his team couldn't listen in) in addition to a later hatred for the Machines, hating them for imprisoning Smith in the Matrix with the humans. (And of humans, Neo in particular is despised by Smith)
Brown and Jones are both very precise and rational in their actions, fleeing when it is necessary and obeying the Source. However, it is implied that there is some resentment or disagreement between the three at certain times, when instead of consulting each other (As is Agent protocol) Smith orders the other Agents ("Find them and destroy them") and Jones seems to do the same in retaliation to Smith ("Order the strike.") Smith becomes more and more emotional over the course of the series, (pertaining to anger) and is infuriated by Neo's illogical answer during their final confrontation, "Why Mr. Anderson, why do you persist?" "Because I choose to"
The philisophical connotations are this:
Smith is a nihilist, stating "It was your life that taught me the purpose of all life... The purpose of life is to end"
Neo is hope, the opposite of Smith, fighting against impossible odds for the possible freedom of humanity.
The Agents have no physical form. The only way they can appear physically is by taking over a human jacked into the Source. So, every Agent at any time is overwritten onto a human. If you kill the Agent, the Agent simply hops to another host, leaving the dead human.
For example: There is a lady walking down the street. She is close to a Redpill that the Agents are tracking. An Agent then "hops" over to her, copying over her and leaving his previous host behind, disoriented. All the host probably remembers was living his life when he suddenly blacked out (The Agent took over his body) and is just now waking up (The Agent left his body.) The code the Agents use to overwrite him ensures he remembers nothing, thereby leaving him obviously confused as to how he got here. If an Agent "dies," say by a shot to the head, he simply "hops" to a nearby human. The original host will appear dead with a shot to the head. As a result, Agents are extremely hard to kill. The reason Agents cannot write over Redpills is that they are essentially "hackers" broadcasting from outside the Source. As they are not jacked into the Source, and instead are hacking in from a human-operated input, they cannot find the specific place the human is jacked into to obtain the code used to overwrite them.
What Agent Smith was doing is overwriting people simultaneously, a corruption of the Agent ability. He intended to overwrite himself over every human, program and Redpill. The catch was, he had to do this physically.He could write himself over Redpills since he was free of the Source, thereby not needing any authorization codes to enable him to legally hop. If the Source did let Agents copy themselves multiple times, there is a huge risk the Agents will abuse their power, turning against the Source and proceeding to dominate the Matrix with themselves, not suprisingly, as Agents have an inherent dislike for humans (Smith's dislike turned into a hate) Also, the amount of humans being overwritten might cause a sensation among the human population, creating doubt or fear. The Source designed Agents to be low profile, so their numbers are few, but they are extremely powerful. If there were too many Agents, there would be too many humans experiencing strange phenomenon, and a movement could start, exactly what the Agents don't want. As a general rule, the Agents don't body hop until they die, (and subsequently the host) so there would be nobody to tell the tale. However, if it is of a strategic benefit to the Agent, they will proceed to hop to a human before their host has died.
Morpheus explained Agents very well, saying that "They are everyone, and they are no-one." (They cannot take physical form, but any human jacked into the Source is potentially an Agent) This is why he tells Trinity to stay off the Freeway, as there are so many people around and nearby that the Agents would have ripe pickings for hosts. This fact is evidenced in The Matrix (The first film) when, near the end, Neo is running from the Agents through busy areas of the city (such as the marketplace.) The Agents were always one step behind him and coming from unexpected angles. He exclaims an expletive when he turns the corner to see dozens and dozens of humans in the market.
The Matrix had to subdue humans in order to prevent them from rising against them again, and at the same time had an energy crisis (The UN created the storm clouds on Earth as a last ditch resort, robbing the machines of their former power source, solar energy.) The answer to the human problem and the energy crisis was simple: Use humans for power. There was only one problem. The machines could subdue the human body, but the mind was too powerful, and it was dangerous to keep humans in a coma without brain stimulation, so the Matrix was created for three purposes: 1. Subdue the human mind. 2. Keep the humans healthy. 3. Make humans not want to escape if the truth was offered. (In case such a situation arose)
To this end, they built a paradise Matrix, the first version, thinking they just needed to make the humans content. (Smith explains this to Morpheus.) They scanned the human mind for their version of paradise, implementing Angels and the archetypical view of Utopia. But the humans rejected it, saying the Machines had no capacity to envision true paradise.
Then, reasoning the other way, took visions from man's darkest creations, implementing Vampires and Werewolves (Some survived the wiping and reboot of this Matrix, and sought shelter in the Merovingians employ as "exiles," programs with no purpose but deletion.) But the humans also rejected it. So the Machines created the current Matrix at the turn of the 21st century, the "pinnacle" of human civilization as they saw it, just before the creation of A.I. (Smith explains: "I say your civilization, because as soon as we started thinking for you it really became our civilization")
The Machines wiped the human's minds and created a false reality for them. But "The One" was the human that inherently knew how to manipulate the Matrix, and freed himself and others from it to repopulate the last resort U.N. base, (Zion) with humans that understood the Matrix and could jack in (via the Machine technology "plugs" left from their imprisonment) and therefore could free more humans from the Matrix. As more and more Redpills were created, more and more people had the plug to jack into the Matrix, and the main goal of Zion was to free all humanity from the Machines. The Architect later explains "The One" was a lie. It was a placebo given to the humans to keep them pacified, waiting for the return of it. This ensured the humans would group together, and every time they destroyed Zion it would be a clean wipe. The Architect allowed Zion because he knew that sooner or later, there would be cases of humans escaping, so he lets humans group at Zion so the Machines always know where they are. If he didn't, the humans would scatter into cracks and crevices, making it nearly impossible for the Machines to make sure they aren't secretly building up somewhere. He refers to this as the "anomaly." It is the random occurence that happens with humans, you cannot keep them completely stable.
A way to explain this is from the movie "Jurassic Park" when the Chaos Theorist says "Nature always finds a way" Referring to the Park keeping all dinosaurs female, nature would find a way to let them breed on their own, a completely random occurence that ensures survival. And they eventually "found a way" to interbreed, and populate on their own, thereby creating the ruin of the park. The point is, you can't keep nature under control.
So the humans would escape, over one year, or millions, billions or trillions, some would inevitably escape. The Architect allows Zion so they can systematically wipe the freed humans pooling at the city, thereby "balancing the equation." It is worth mentioning that time does not exist for machines, since they do not die, and would be the same 500 trillion years from now as they would at the present, so they have to make sure humans don't eventually threaten their existence. (Which they did anyway, showing the "Nature will find a way" theory)
As to building power plants, the Machines needed a stable source of energy. Inevitably, even the Sun would die, but humans could repolulate indefinitely. So they used all the Earth's resources to master controlling humans, leaving Earth the scoured ball of rock you see in the movie. If they could completely master the care of humans, there would be no anomalies and it would be an infinite power source. But as the Architect found out, (to his OCD infuriation) he could not perfect this, so allowed Zion to live so he could systematically wipe out the humans every so many hundreds of years and keep infinite harmony.
The reason the Machines do not expand is that they are simply content to exist, unlike humans.
Smith explains: I’d like to share a revelation that I’ve had, during my time here. It came to me when I tried to classify your species and I realized that you aren’t actually mammals. Every mammal on this planet instinctively develops a natural equilibrium with its surrounding environment, but you humans do not. You move to an area and you multiply, and multiply until every natural resource is consumed. The only way you can survive is to spread to another area. There is another organism on this planet that follows the same pattern. Do you know what it is? A virus. Human beings are a disease, a cancer of this planet. You are a plague, and we... are the cure.
The Machines need only to exist, but the humans are driven by passion and a hunger to explore and colonise and dominate... Something the Machines despised the humans for and rebelled against, leading to The Great War of Man vs. Machine. So you see, the Machine's aren't evil, and they aren't soulless. They simply don't understand art, passion or love, and so see humans as just a cancer. They are efficient, and so their looks might not look friendly to humans, but they only build the minimum to the maximum, they have all of time to think and perfect, and are infinitely patient. Compared with the Machine's view of the world, humans are a teeming mass of fast moving insects that skitter off if left unchecked. The Machines can grow, you can argue with them, they do have personalities, they just aren't human, and don't understand us, and while we see imprisoning humans as evil, the Machines see it as existence, mutual harmony. They give us a world, we give them energy. But the humans are fickle, and want the truth no matter what the cost, so we fought against the system, inciting the need for machines to keep their weapons of war and further despise the irrational thinking of the humans. The Machine Mind at the end of the third movie, I think, came to respect humans by keeping his word, and hopefully ensuring a brighter future for both species.
Whoops, I guess my post last night didn't go through...
Smith's copy power was a corruption of his transfer power. Copying is something the Source would not allow Agents to do, but Smith went rogue, and increased his own power much like Neo increased his; He was no longer bound to following the rules, as anyone jacked into the Source is.
And yes, they are very hard to kill because of their transfer power. They transfer right before they die. (And pretty exacting at that, since they are programs, they don't hesitate like humans) The only way to really kill an Agent would be to kill him without any humans in a significant radius, a feat which would go unrewarded in the long-term, since the Source will simply create a replacement.
The reason the Source cannot create many replacements or allow many copies has been explained above.
As for the programs, you must first understand the Merovingian... (Rubs hands together) This is my favorite part:
The Merovingian is the opposite of the Oracle. While the latter has the power of foresight, the Merovingian has the power of hindsight. The Oracles strength is inductive reasoning, while the Merovingians is deductive reasoning. The Merovingian longs for "The eyes of the Oracle" thereby making him virtually all-seeing.
The Merovingian operates underground, hidden from the Source. Here he hides Exiles, programs that no longer have a purpose, normally deleted by the Source. However, Exiles whom he deems useful he strikes a deal with: He will shelter them from the Source if they remain loyal to him. The Merovingian has many Exiles in his employ, mostly exiles from the 2nd version of the Matrix. If you recall, the 2nd version of the Matrix was designed from man's darkest creations, scanning their minds and implementing Vampires, Werewolves and Ghosts. Some of these programs escaped deletion on the reboot of the Matrix program, and sought shelter with the Merovingian. They had excellent combat skills, so the Merovingian employed them as bodyguards. (The ones you see in the Chateau fight are Vampires)
So to recap, the Merovingian employs Exiles that can serve a purpose for him. The Keymaker is one such Exile that the Merovingian highly values, as he allows for many of the Merovingians escapes from the Source. You will notice while watching Reloaded that when a door is opened with a special key it leads somewhere completely different. His Chateau is in the mountains, but the Keymaker used a key to open a door that would normally lead to an outside mountain balcony to a parking lot beside the freeway instead. When the door was closed by The Twins, and subsequently smashed open by Neo, it led to the mountains, as it normally did. (Closing the door apparently resets the dimension) The Trainman is also in the employ of the Merovingian, as he owns a secret medium between the Matrix and the real world, (or a Construct connected to the real world) and can ferry people either way. The Merovingian uses this to barter passage with people seeking to cross, for a price. (As always, my kind of guy) He operates restaurants, nightclubs and other high end installations, much like a mob operator.
Vampires feed on the code present in blood, while Ghosts can turn incorporeal (abandon their physical code temporarily) This is where all the supernatural stories come from. Exiles are very loyal to the Merovingian, as without him they would almost certainly be found by Agents and terminated, as is Source protocol. This was the main objective of the Agent following Morpheus on the freeway, and the reason they let Trinity escape. The Keymaker knew the way to the Architect, and was the Agents primary target.
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