What do you have to be aware of when you see this traffic sign?

This sign marks a “traffic-calmed area” (Spielstraße). Your selections 1, 2, and 3 are all correct because in this zone pedestrians and especially children have priority and vehicles must behave like guests.

Answer 1 is correct: children are allowed to play on the road and can appear anywhere, unpredictably, not just on the sidewalk. You must be ready to stop at any time.

Answer 2 is correct: motor vehicles may only drive at walking speed. Rule of thumb: so slowly that you could stop immediately within a few meters.

Answer 3 is correct: pedestrians may use the entire width of the road. That means you must not pressure them to make space; you wait and pass only at walking speed and only if it can be done without endangering or disturbing them.