Discernment vs. judgement in the labeling meditation To watch the mind, as far as I understand, is to simply watch the mind without judging it. But there is a method, which teaches us to note sad when we are sad, dislike when we dislike something, happy when we are happy, etc.. 

How is this mental labeling different to judgemental mind? 

Will this indirectly train someone's mind, to become more judgemental of oneself and others?
I guess the big difference between mentally noting vs judging what you are experiencing is the degree of objectivity. Noting helps you to perceive your experiences with clarity, which should in turn allow you to gain wisdom through insight into the nature of all experiences/phenomena. For example, if you are experiencing sadness and you note, "sad" you remain impartial. In this way, you clearly observe and experience the feeling of sadness. Your field of experiential perception remains unhindered by inner conflict (reacting to the sadness, rather than just noting it) and you are able to understand the ultimate reality of your sadness. This, applied to all experiences, should also allow you to develop equanimity, one of the seven factors of enlightenment. 

Conversely, if you experience sadness and mentally oppose the sadness, you fail to remain objective through your experience and hinder your ability to perceive and learn about/come to understand your experience. This obviously prevents equanimity but, perhaps more importantly, prevents one from clear comprehension of events (such as a sad state of mind) and thus prevents insight into the nature of such events.

So, the "mental-labeling" technique, as described by the Venerable Mahasi Sayadaw, is actually intended (and more likely than not) to help one become LESS judgmental to oneself and others.

/\