Yeah, see? No perplexion. He knows that's something Tedd does.
That said, panel two is noteworthy for a few reasons. For one, it's official acknowledgement that Tedd has intentionally transformed himself into a girl before for entirely personal reasons. Of course, he's still at a point where he'll make a variety of excuses for it, but it's still established.
The device being used is a computer system designed specifically for testing the effects of the transformation beam. It can actually do far more than flash a green light (that's a monitor sticking up in panel one), but really, do you need more than good ol' greenie? Flash on, green light. Flash on.
Commentary added November 30, 2014