It's a percentage. It could be calculated and plotted in discrete yearly steps, but this chart shows the instantaneous (i.e., continuous) rate of inflation. "Annualized" just means that the rates are expressed at each point on the curve as though that rate of inflation were constant for a whole year and the money supply at the end of that year were compared to that at the beginning of the year. Inflation is usually expressed as an annualized rate. When you hear that the Federal Reserve is targeting an inflation rate of 2%, that's an annualized rate.