smells are detected by a matrix of nerve fibres, called the olfactory apparatus, located at the top of the nose. Groups of nerve fibres bear receptors on their surfaces which are sensitive to specific odourants (smells) in the air.
When air is breathed in through the nose odourant molecules lock on to receptors on the nerve fibres and activate (stimulate) them. Specific odourants activate only specific nerves rather like a key in a lock.
The greater the concentration of an odourant in the inhaled air, the greater the receptor occupancy on the nerve fibre and hence the greater the signal that is transmitted to the brain, creating the perception of a stronger odour.
So what is a 'smell' ? When you experience a 'smell' you are perceiving the composite effect of many odourants simultaneously. A smell is essentially the 'spectrum' of odourants present in inhaled air. Rather like a colour monitor, you can vary the red, green or blue fraction in the signal to alter the colour the screen displays. Obviously there are more than 3 odourants, but the principle is the same.
You ask whether smell is frequency coded ? It is in the sense that when the chemoreceptive nerve fibres first detect a smell they fire nerve impulses (action potentials) to the brain very rapidly, but they quickly 'adapt' and reduce their rate of firing, even though the concentration of the smell remains the same. This is why we 'get used to' or 'acclimatise' to smells (particularly useful in farm yards and hospitals !) and eventually stop noticing them. The purpose of this dynamic response is that it prevents sensory overload, and enables you to continue to perceive new information.
Regarding storing smell in the same way that images are stored, companies have now developed highly sensitive artificial noses which can plot a graphical profile, the equivalent of an odour 'fingerprint' of the odourants consituting a smell. These profiles can be used by the food industry to work out what flavours go well together (because their smell 'fingerprints' are very similar or have a number of corresponding peaks and troughs) and also by security forces to detect drugs, or even anthrax (http://www.thenakedscientists.com/html/shows/2002.03.10.htm#2
For further information about smells, including sexual smells (pheromones) you could check out expert Peter Brennan's articles :http://www.thenakedscientists.com/HTML/articles/article/peterbrennancolumn.htmhttp://www.thenakedscientists.com/HTML/articles/article/peterbrennancolumn2.htm
and Peter's interview with The Naked Scientists :http://www.thenakedscientists.com/html/guestfile/peterbrennan.htm