This is essentially the same as your other recent CM-theory question, in a mild disguise; for both questions the point is that $\psi(I)$ is a generator of $I$. This follows easily from the fact that $\psi$ takes values in $K$, and for principal ideals $(\lambda)$ with generators sufficiently congruent to 1 we have $\psi(\ (\lambda)\ ) = \lambda$.
Perhaps an example would be helpful. Consider the elliptic curve of conductor 49, with Weierstrass equation $y^2 + xy = x^3 - x^2 - 2x - 1$. (This is 49a1 in Cremona's tables, and 49a4 in the LMFDB; it also happens to be the modular curve $X_0(49)$, but that isn't important here.)
This curve has CM by the ring of integers $R_K = \mathbb{Z}[(1 + \sqrt{-7})/2]$ of $\mathbb{Q}(\sqrt{-7})$, and one can write down the corresponding Groessencharacter explicitly:
For $\mathfrak{a}$ any integral ideal of $R_K$ coprime to the ideal $\mathfrak{f} = \sqrt{-7} R_K$, the value $\psi(\mathfrak{a})$ is the unique generator of $\mathfrak{a}$ whose image in $(R_K / \mathfrak{f})^\times \cong (\mathbb{Z} / 7\mathbb{Z})^\times$ is a square.
Note this makes sense, because $R_K$ has class number 1 and its only units are $\pm 1$; so every $\mathfrak{a}$ has exactly two generators, say $x$ and $-x$, and as $-1$ is not a square mod 7, precisely one of these is a square.