Blue Locket is the first locket found of the Original Mermaids.
Cleo's locket originally belonged to Gracie who became a mermaid over 50 years ago. Gracie found it more and more difficult being a mermaid, and longed to be an ordinary girl again. So Max Hamilton made three lockets - one for each girl and each was slightly different; Gracie's locket has a blue stone - possibly a sapphire. This could symbolize the ability to control water. Max created the lockets to help the girls to believe that they were part of something special.
However, Gracie still longed to be an ordinary girl and one night there was a very powerful Full Moon and Gracie entered the Moon Pool and lost her mermaid powers forever. It is unknown what happened to Gracie after that, but when Charlotte Watsford (Gracie's granddaughter) was 6 years old, Gracie died.
Cleo wears her locket often, however in the episode, "And Then There Were Four" Charlotte becomes a mermaid and believes that Cleo, Emma and Rikki do not deserve their mermaid powers and that Charlotte is a 'Super Mermaid.' Then in the episode, "Sea Change" Charlotte steals Cleo's locket, saying that she doesn't deserve it and that it belongs to her.
Lewis does nothing when Charlotte told him that Cleo gave it to her of her own free will because he believed that Cleo gave the locket to Charlotte, because it was her grandmother's. He remained skeptical about it until he heard Cleo's heart-breaking message on his phone (which Charlotte tried to hide from him in order to prevent them from seeing each other). After Charlotte lost her mermaid powers, Lewis managed to retrieve the locket and gave it back to Cleo.