Mood rings, being very popular in the 1970's, are one of the easiest novelty items to explain. Many people use them today for biofeedback and determining anxiety levels. In the days past they were used to keep a check on your emotions. They are more likely to produce desirable effects in the biofeedback area than to reflect your actual mood or emotion.
The stone of a mood ring can be one of a couple of things. It can either be a clear glass stone sitting on top of a thin sheet of liquid crystals or it can be a hollow glass shell filled with thermotropic liquid crystals.
Liquid crystal molecules are very sensitive. They will change positions or twist by varying the temperature reflected to them. When they twist or bend it changes their molecular structure changing the wavelength's of light that are absorbed or reflected from them. Hence the changing color with a rise or fall of body temperature.
The inside of the ring conducts heat from your finger to the liquid crystals in the stone. The majority of people have an average body temperature of about 82 degree's. Therefore the crystals were calibrated to show green at this temperature. If your body temperature varied from this norm your ring would show a different color for average.
The colors of a mood ring ranged from a dark blue to black. Dark blue being the warmest and black being the coldest. If you consider that since dark blue signified love and passion you can understand why people fell for the trick. When you are in a passionate mood your capillaries in the skin move closer to the surface giving you a flushed look and warmer skin.
Where as on the other end of the spectrum if you were nervous or stressed your skin would feel rather clammy. This is because your capillaries are moving deeper under the skin and actually cooling the bodies surface temperature causing the stone to turn grey or black.
If your normal skin temperature varies greatly from the norm of 82 degrees the mood ring cannot work. If your normal color is not green but dark blue then the ring cannot measure a warmer response. The same is true the other way, if your normal temperature has the color at gray you can't register much cooler.
Though alot of fun both then and now mood rings are a novelty and cannot predict your emotions. They can however provide some biofeedback as to the temperature of your skin while at the same time being kind of decorative.