In order for the plugin to work, you have to have a Mail Server configured. Choose that Mail Server in the drop down labeled Default Mail Server for the plugin.
The plugin adds images to emails by encoding, embedding and optionally compressing them. Compression will be used for pictures with a pixel size (width or height) greater or equal to the value labeled Maximum length of a side of a picture in pixels. Enter 0, if you don't want pictures to be compressed.
Finally, you can decide, which icon will be displayed in the header of an email - your globally used Confluence icon (e.g. company logo) or the icon used in the Space the shared page belongs to (e.g. department logo)