Litecoin's "Script" language enables smart contract functionality through its ability to define custom conditions under which transactions can be spent. By allowing users to create custom scripts that determine the conditions for spending Litecoin, smart contracts can be created and executed on the Litecoin blockchain. These scripts can include various conditions, such as time locks, multi-signature requirements, and other custom rules, allowing for a wide range of smart contract applications on the Litecoin network.