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Once user placed an order I would like to send SMS alert to user.

When I look for event, I found checkout_onepage_controller_success_action and sales_order_place_after.

Operationally, they both doing same I believe. Is there any difference between these two? Which one should be used in my case?

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checkout_onepage_controller_success_action event fire whenever checkout/onepage/success page is rendered * ,other wise it does not fire*

And sales_order_place_after fire whenever we call Mage_Sales_Model_Order object's function place() called. And its call totally depends on payment mathods configuration*

From my point of view it will better to use checkout_onepage_controller_success_action ,use of after order payment ,you may be want to fire sms.

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You need to use observer for sales_order_place_after action. Because it depends if order create on the admin panel

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