1) Everywhere I keep reading stuff of the kind "Observe your thoughts without judgment". What does that really translate into in practice? How do you observe without judging? I mean, if you get sad thoughts, you get sad too. Thats why they are called sad thoughts. I never understood how to actually follow this advise.
When any thoughts arise there is a feeling accompanying them. Thei can be pleasant (happy throughs) or unpleasant (anger, sad, fear) or neutral.
On cognizing a mind-object with the mind,
one investigates the mind-object that the basis of mental joy,
one investigates the mind-object that is the basis of mental pain,
one investigates the mind-object that is the basis of equanimity.
Dhātu Vibhaṅga Sutta
If they are pleasant this leads to craving / covetousness and if they are unpleasant they lead to aversion, which you should avoid.
a monk dwells exertive, clearly aware, mindful,
observing the mind in the mind,
removing covetousness and displeasure in regard to the world
Mahā Sati’patthāna Sutta
Non judgemental way is not to have any attachment or aversion to the pleasant, unpleasant and knowing the nature of neutral sensations arising from the thoughts.
the latent tendency to lust reinforced by being attached to pleasant feelings;
the latent tendency to aversion reinforced by rejecting painful feelings;
the latent tendency to ignorance reinforced by ignoring neutral feelings.
pleasant feeling is pleasant when it persists, painful when it changes;
painful feeling is painful when it persists, pleasant when it changes;
neutral feeling is pleasant when there is knowledge of it,
painful when there is no knowledge of it
Cūla Vedalla Sutta
If you do become judgemental this leads to attachment or aversion which should be avoided.
Taking the painful as pleasurable
when the latent tendency of lust takes over, we are lustful;
when the latent tendency of hate takes over, we are hateful;
when the latent tendency of ignorance takes over, we are delusive
If you are non judgemental where by maintaining complete equanimity and towards any sensation knowing their impermanence, you will not be overcome by latent tendencies.
Also it is the sensations as there are many Suttas which are assertive about it:
all mental states flow along with feeling - Vedanā samosaranā sabbe dhammā
Kiṁ Mūlaka Sutta
Ānanda, two kinds of feeling, relatively speaking [by way of instructing], have been spoken of by me.
Three kinds of feeling, too, relatively speaking, have been spoken of by me.
Five kinds of feeling, too, relatively speaking, have been spoken of by me.
Six kinds of feeling, too, relatively speaking, have been spoken of by me.
Eighteen kinds of feeling, too, relatively speaking, have been spoken of by me.
Thirty-six kinds of feeling, too, relatively speaking, have been spoken of by me.
One hundred and eight kinds of feeling, too, relatively speaking, have been spoken of by me.
Thus, Ānanda, has the Dharma been shown by me in a relative manner.
Also see this answer for a more generic description and more references.
2) Again, I keep reading "Observe this particular moment", "be in this moment" etc. What other moment are we normally in? What special tasks do we need to undertake to be in this moment? I mean, as long as you don't daydream about the future or wallow in the past, you're in the moment, right? This is something I again fail to comprehend clearly.
Your thoughts tend to roll and be preoccupied in the past and future most of the time than the present and many of these thoughts are either pleasant or unpleasant leading to craving and aversion. There are times you mind is in the present also dwelling in pleasant or unpleasant thoughts which also should be avoided.
Thus, there are thirty-six such preoccupations with craving regarding the past,
preoccupations with craving regarding the future,
and preoccupation with craving regarding the present,
making 108 preoccupations with craving
Tanhā Jālinī Sutta
Being is the present means to be aware of the sensations resulting from thoughts and mental activity observing their arising and passing nature.
All sensations are unsatisfactory. This is the key point which links to the 1st Noble Truth in the 4 Noble Truths and the main link (among the 12 links) which you can break the vicious cycle of Dependent Arising. In this specific case every thought that arises in your mind you should try to understand the working of Dependent Arising and 4 Noble Truths at the experiential level. This is not a logical thinking exercise just keep looking at the arising and passing of the sensations due to your thinking and metal activity.
3)"Observe the breath". Do I feel the breath? Or note that I am breathing? Or count the breath? It just feels like more thinking.
You should not count, visualise or verbalise as this leads to creating verbal fabrications.
Breath meditation at early stages involve Vitarka and Vicara which is like thinking and pondering.
4) How do you ever "know" that your meditation is working right? Or how do you even know your practice is headed in the right direction? I got tired after 2 years of it and nothing in return. Okay maybe I did it wrong, but how would it have been had I done it right? Is there a time frame within which you can expect some sort of result if you do it right?
There are many measures of progress. See these answers one answer on progress, another answer on progress. Also if you are too concerned with the progress this will lead to excessive efforts and also resentment which hinder progress.
5) There seem to be many kinds of meditations, each with its own set of fanboys. Are these different types simply different paths to the same goal? Or are they meant for different goals? Moreover, are their learning curves different? How do I know what is right for me? Does this analysis even matter at all or am I just complicating things needlessly? My aim is to be able to concentrate and think clearly without getting overwhelmed.
Many meditation have different goals. E.g. Samatha does not deal with ultimate peace but limited to mastery over the mind. There are many types or Kammaṭṭhāna. Vipassanā is what aims at ultimate peace and happiness. This also has been thought in different ways with some techniques being effective than the other overall. Also a technique that works for one may not be the best suited for another. You have to figure what works. If you have not already tried it have a look at:
which follows the tradition of Ledi Sayadaw, Saya Thetgyi, Saya Gyi U Ba Khin, Webu Sayadaw.
In addition there are lineages and tradition which you might be able to find from:
Notable other traditions are:
Also do not change your practice too often. Give any type of meditation and ernest and fair trial for about 6 months to 1 year and if it does not work more on. If you see that one technique is working and you are making continuous progress then stick to it without changing.
Also validate if the theory and practice is congruent and the practice validates the theory.