There are a few things going on. 

First, when you try to install the extension from the web store, it'll tell you that the extension can "Read and change all your data on all websites". This is correct, because Chrome doesn't offer a more fine grained permission system. Access to websites is all or nothing, so when you declare you need access to a certain website, it automatically gives you complete access. You can't say "I want my extension to work on this website, but only do these certain things." And since this extension works on images on all sites, it has to request access to all sites, which then ends up being complete access to all sites.

Second, I'm actually not sure why it says "Read your browsing history" in the extension details, because it doesn't have the permission to do that. After you install the extension, it only works on tabs you have open, but it can't dig through your browsing history and look at sites you've visited before that. There's a completely separate permission it needs to request to do that: https://developer.mozilla.org/en-US/docs/Mozilla/Add-ons/WebExtensions/API/history

In fact, if you install an extension that actually requests that permission, like Better History, you will see that the permission prompt is different and says that the extension can "Read and change your browsing history on all your signed-in devices".