Not exactly. It shows if a device is announced on the DHT. You don’t really know if the contact is online (same on many app, e.g. whatsapp, the green dot only mean that a socket was detected recently, but your contact can be disconnected.)
A lot of people uses mobile where the application is killed by the operating system as soon as the app not shown (or some minutes after). However, applications can be restarted on events. Also the connection can be cut shortly, etc. So “online” is pretty vague.
On jami, each device will announce its presence on the DHT (and the presence got a TTL of 10 min). If proxy and push are enabled, the proxy will announce this presence for a long time and will send events to wake up the mobile device.
So basically a green dot is that the device was announced recently.