My daughter did this at that age. She was so interested in everything else that was going on. This is the age where they really seem to notice everything in the world around them - it is so magical to watch their looks of wonder and awe.
The smiling isn't because she thinks it is funny to yank your nipple, but because she is just noticing all of the wonderful sights and sounds surrounding her.
The advice I was given was to try to nurse her in a darkened room, when possible.
Of course that isn't always possible when you're out and about, so I would use my sling or a blanket or sweater to cover myself slightly so when she did turn away I wouldn't be exposed.
It shouldn't last too long, so don't worry about it.