Storyteller - S7-E16
Revealing mistake: When Buffy, Spike, Andrew and Robin go to the high school and find it decimated, Buffy is thrown to the ground and attacked with a hockey stick. On the second swing, a sound effect is heard and Buffy falls over. But the hockey stick never makes contact with her.
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.