He's used the sonic for reading details for while...Ten used it to scan Donna when he first met her as well.
He always seemed to be looking at something on the handle... Like he was reading off some little screen we didn't see.
Either that or he was looking at a clear tube with a couple of wires in it and somehow interpreting the information from that, which I never really understood. It looked and felt a bit like he was miming it, especially since he didn't always check the sonic after scanning something and it wasn't always in any specific position (collapsed or extended) during or after a scan, so it was a bit inconsistent. Usually he'd scan something then extend it and look at the wires or something on the handle, but not always.
The dark green inside this screwdriver, which is only exposed in its open position, is somehow more convincing to me.
The unknown makeup of this crystal-looking substance (probably the same that's in the Tardis), the size of the exposed portion (an actual area to read something), the way Smith cocks his head to read it and the fact that it appears to be very dark in color helps make it seem a bit more plausible (you can almost imagine text appearing on it... maybe like a magic 8 ball or something, as opposed to a clear tube).
If I had to guess I'd say the sonic acts as a sort of probe for the Tardis. It scans something and relays it to the Tardis. The Tardis then computes everything and telepathically makes that info available to the Doctor, who can read it by focusing on a certain point of the screwdriver.
Text may not physically appear on the sonic, but focusing on the green crystal creates a psychic bond with the Tardis and enables him to pick up that information.
Or something. I don't know.