What does a "social media agency" do?

[Jody]

They provide social media to a consumer generated media (CGM) that includes a blending of technology and social interaction for the co-creation of value.

They create websites related to web pages containing content such as text, images, video, audio, etc, and make is accessible and available via a network such as the Internet or a private local area network through an internet address known as a uniform resource locator.

There are six types of social media sites:

collaberative projects; Wikipedia
blogs and microblogs; Twitter
content communities; Youtube
social networking sites; Facebook
virtual game worlds; World of Warcraft
virtual social worlds; Second Life

For more information of social media agencies follow wiki link below.