I’ve been using popular posts plug in for a while and it was working great. Tonight I updated a bunch of my plug ins and it stopped appearing correctly as a widget, and only appears in basic html form, which makes it look like a google ad block on my page, instead of my content.
It seems that you forgot to add
< ul > and < /ul > (without the spaces!) (alternatively, < ol > and < /ol > if you want it to display as a numbered list) into the “Before / after Popular Posts” fields (Settings > WordPress Popular Posts, don’t remember the actual path for older versions of WordPress).
Give it a try and let me know if you find any other issues!