You should configure the badge by clicking the "Edit" link and select the "Two line basic" style and check the "Show your status message" checkbox. Then click "Updade badge" to save your changes.
After editing the badge you will see a text box containing HTML code of the badge. Inside you will find a piece of code like: <iframe src="http://www.google.com/talk/service/badge/Show?....">
<iframe src="http://www.google.com/talk/service/badge/Show?....">
You have to copy the whole value of the "src" attribute into the text box below.
