^Gold thoroughly explained it in the episode. It's a byproduct of sleeping spells.
Actually, that just made me wonder if Gold was responsible. Even if it's true about it being a by-product of the sleeping spell, it's quite a coincidence that both of the characters are stuck in the same dream-- and Gold uncharacteristically gave the talisman to Henry for free.
Greg Cox wrote:
That was Gus-Gus from Disney's CINDERELLA.
Ah, thanks. It's been ages since I saw that movie.