It doesn't have to be but the best is. The Spanish version is pimenton ahumado. And it's far superior to the stuff that passes for "paprika" in your local supermarket, which might as well be used as just a coloring agent for deviled eggs. Pimenton is taken very seriously in Spain, and is not terribly hard to find here. I guess the Hungarian paprika cartel hasn't quite yet figured out how to to market their good stuff or maybe they are just keeping it to themselves.

Yes, much of it is. Hungarian smoked paprikas are also common.