Maybe I need to explicitly mention on the extension installation page that we are not capturing any browser history or such.

Since we need to keep track of tabs for each project, maybe that's what pops up this message.

Unfortunately Chrome/Android has a terrible approach when asking for permissions. Since they only know the class of permission (instead of what the dev is doing with them), they pop up a scary-sounding warning and hope the user figures things out. On top of desensitizing users to real threats, I can recall many times when I decided against installing an Android/Chrome app because I couldn't/didn't want to figure out how it would impact my system and didn't want to take a risk on some one-person operation.

Amusingly, I never had this issue on iOS because Apple never warns you and as a user I can assume (rightly or wrongly) that all iOS apps are safe. I wonder when Google will catch on because I personally still feel their app marketplace is much more dangerous than Apple's.

Google needs to work on permissions more. They need to show granular-level permission details. Currently the permission details are very broad. Something like, why this "extension needs this-specific permission" clause during installation might help users.

Maybe the community can check if the extension or app is not malicious. And its not sending any data to remote servers. Recently I tweeted on the same to @google-chrome-team, they don't have a support team to even acknowledge back. :D And I don't understand for what reason they stay in Twitter.

I will add those prominently on the Chrome Webstore Installation page (and maybe the homepage).

I agree, with the iOS App Store, one doesn't have to worry about it as much because you know that all apps go through a review process and wouldn't be approved if they were doing something terrible.