The Love Stone is a gem found in The 7D's jewel mine. A person who's in possession with it makes anyone fall in love with the possessor.
In the show
In "For the Love of Cheese", Grim was accidentally transformed into a frog. He has to get a kiss from Hildy to become human again, but she doesn't like slimy things, including frogs. She thinks that the Love Stone can change Grim back upon hearing about it from their Crystal Ball, in which they saw Grumpy has possession of it after stumbling across it at the mine. But she didn't know the gem's true effect as warned by the Crystal Ball because she rushed out of the house.
Grumpy was then spotted by Hildy; with the Love Stone with him, Hildy falls in love with Grumpy and he escaped. Several attempts by Hildy to retrieve the stone ultimately lead to the 7D's home. After Grumpy brought the Love Stone into the house, the other dwarfs are in love with him, too. This was soon stopped when Doc learned of the gem's effects and tells the dwarfs. Grim, still a frog, arrived outside the 7D's home while Hildy was waiting. He then kissed her, and he transformed back to his human self. The Love Stone was thrown out by Doc, and as Hildy picked it up Grim was entranced by its effects (and the rabbits and a bear that was under its effects earlier in the episode arrived as well). Back at their the Gloom's manor, the Love Stone was still with Grim and Hildy -- and with the rabbits and the bear hugging them.