The Shard of Stronnos was a mystical artifact with the power to convert energy into matter and viceversa. It was in the power of the Watchers Council and under the care of Edna Giles and her son, even though they were actually unable to use it.
Edna's sisters, Sophie and Lavinia Fairweather, approached her so they could use the Shard to restore their lovers, which had been transformed into beings of light and trapped inside mirrors by an unidentified light demon. The demon followed the Fairweather sisters, knowing they would lead him to the Shard, which the demon wanted to make his species corporeal. Young Rupert Giles accidentally activated the Shard, making the Light Demon corporeal, and vulnerable to be killed. Afterward, Edna gave the Shard to her sisters, who kept it for decades.
Sophie and Lavinia have recently given the Shard to Angel after learning of his plan to resurrect Giles with the Tooth of Ammut, reasoning that the Shard represents the last of Giles's childish innocence before he was forced to begin his training in magic.