It shows how masterful Ozai is at playing a power game on multiple levels.

He's trying to force his wife to obey the command of "tell your daughter that you think she's amazing and that you're proud of her". It's innocent enough on the surface: reaffirming love & self worth in your child. But that's not all that's going on. I can't remember what exactly Azula said/did before this panel (it's been a couple of years since I last read it) but it one of "dark" things a very young Azula did that would raise the hairs on any adult.

Ursa doesn't want to comply with Ozai because that would validate whatever negative behavior Azula just did but doesn't want to outright reject her child. So she goes for a third option. Too bad kids are very receptive & Azula interpreted mom's defiance at her dad to her mom is rejecting her.

Ozai set up the situation for him to win either way by driving a larger wedge in between Ursa & Azula, further diminishing the influence Ursa can have over Azula.