It's a good start. Two suggestions for improvements. One, adjust the colors of the icon for the different settings--at the very least, it can be hard to distinguish the "black" from the "blue" at a quick glance. Perhaps make the colors a bit brighter.

Two, it would be great if the change in settings could be made permanent (i.e., at least until the user decides to change the settings). While there are some websites where I'm happy to have all links open in the same tab, there are others sites I regularly use where I ALWAYS want all links to open in a new tab and it would be more convenient to not have to remember to click on the icon every time I visit those particular sites.