What does this traffic sign indicate?

Your choice (answer 1) is correct. This sign means the special road section “motor-vehicles-only” ends here. Up to this point, only motor vehicles were allowed to use the road, so slower or non-motor traffic (for example bicycles or pedestrians) was excluded.

After this sign, that special restriction no longer applies. From here on, you must follow whatever the next rules/signs indicate for the road type you are entering (for example a normal road with general traffic rules, or possibly new restrictions shown by other signs).

It is not “end of the autobahn” (that has a different symbol), and it is not “motor vehicles prohibited” (that would be a red circular prohibition sign). The key rule of thumb: a blue square indicates a designated road type/requirement, and the red diagonal slash means “end of that designation.”