Opening a new tab on Google Chrome Extension

You should read the chrome.tabs.create documentation again. You are passing it invald parameters. You are also using location which is from the background.html document not the webpage document the code is expecting instead of the tab parameter passed to the chrome.browserAction.onClicked listener.

<html>
<head>
<script>
  // Called when the user clicks on the browser action.
  chrome.browserAction.onClicked.addListener(function(tab) {
    var action_url = "http://www.reddit.com/submit?url=" + encodeURIComponent(tab.href) + '&title=' + encodeURIComponent(tab.title);
    chrome.tabs.create({ url: action_url });
  });
</script>
</head>
</html>

You can try this

<html>
...
<body>
    <script>
    function createTab() {
        chrome.tabs.create({url: "http://www.stackoverflow.com"});
    }
    </script>
    <a href="#" onclick="createTab();">Create a new tab</a>
</body>
</html>