Trivia: While planning the Angelus arc near the end of the season, Joss Whedon was unsure if David Boreanaz could pull off the character's personality. Boreanaz's interpretation was so good, he ended up completely creeping out Whedon.
Trivia: Season Two was the only Emmy winning season of the show's seven season run. Christoph Beck won for his score to the episode Becoming, Part 1 and the makeup team won for their work on the two parter Surprise / Innocence.
Chosen answer: Angel is saying that he is still jealous and Buffy recognizes that this is his way of saying he wishes that they could be together. That is why they both smile.