Continuity mistake: When Spike is stalking Buffy in front of her house, she somehow senses him and pulls him out of behind the tree in front of her porch. While he is being pulled out, he has no cigarette in his mouth. However in the next close-up shot, he has one (which he then quickly throws away). (00:29:55)
Continuity mistake: At the beginning of the episode Buffy is thrown against a 'No Trespassing' sign and the sign is all crinkled, the vampire also punches it but later in the episode we see the same sign except that it looks brand new.
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.