It's a paradoxical phrase because mud is inherently murky and opaque, the opposite of clear.
Therefore, it doesn't have a literal meaning. It's used figuratively to highlight the absurdity of a situation where something supposedly clear is actually confusing.
Here are some examples:
* "The instructions were as clear as mud, I have no idea what to do."
* "The politician's speech was as clear as mud, I couldn't understand a single point he was making."