Oh boy. Great fandom moment right here, but since it's all fake... is it really worth it? I recently learned the symbolism of the caldaggh, or however you spell it, from a Queer Eye re-run. That's great!
Well, it's just a dream Jareth's having because we all know this wouldn't happen in canon. Sarah's too stubborn, or else too focused on things at the surface, to read the subtext and see that Jareth's hopelessly in love with her (in his own way). And of course, the claddagh is an Irish symbol of two hands, holding a heart, with a crown over them; it is a symbol of fidelity and love. If you wear it as a ring, if the ring is turned inwards, you're closed off to advances, and if it is facing an onlooker, that means you're ready for love.