There is a lot of confusion about what are muddy watercolors and how not to create them.
Firstly muddy watercolors are not the color of mud. Some of the most beautiful watercolors I have seen have been in browns and greys, commonly associated with mud.
Muddy watercolors are dull and lifeless, without the translucence we normaly associate with a good watercolor.
Mud happens when you continue to overwork a watercolor passage (fiddling) once the paper has lost its shine and is just damp. If the paper still has a shine on it, as in a wet-on-wet technique, then you will not create mud. This is because if you paint with the shine on the paper, each watercolor stroke will be able to settle smoothly onto the paper surface.
However, once the paper has lost its shine, each new painting stroke is not able to smoothly settle on the surface. Instead it sits up in a rough manner. This does not allow for the light to easily pass through it and create a translucent watercolor passage.
Wet sand analogy and muddy watercolors
It might be easier to understand this if you think about wet sand on the beach. You cannot write your name in sand that is covered with water. The sand keeps settling down into a smooth layer. However, you can in sand which is just damp. Parts of the sand will stay up, and there will also be a groove in the sand. These raised sections, and grooves, cast shadows on the surface. They reduce the amount of light reflecting back from the sand. This is very similar to what happens in a muddy watercolor.
Also, on a beach, if there are marks in the damp sand, and a wave washes over then and flows back out, the receecing water leaves behind a nice smooth surface. This is why, when you lay down a watercolor wash, you need to have enough paint in your brush that, as you move down the paper, keeps flowing. This leaves behind a lovely smooth watercolor surface. When artists talk about painting with a bead of paint, this is what they mean. The wash has to have enough paint flowing that it keeps creating a beed at the bottom of each brush stroke. Keeping this beed moving down the paper will create the lovely translucent watercolor we all love.