I've just had kensho. I get it: the next time you want to (correctly) use that s-fraud word, just say, "It's not mudita".
More points if you can pull it off with a zen-like serenity; you might want to raise your palm gently while saying it. Or if you have a beard, you could also gently stroke it. (Won't work with moustaches or fake beards though.)
No, I think the latter refers to the act itself. I don't have a problem with the concept of laughing at others' misfortune; I just don't want to be one of populist bandwagon-jumpers in thinking it's the greatest, coolest, smartest word ever. When the frenzy over the word dies down, maybe I'll welcome it back. As for now, it's just annoyingly overrated. :-)
I freely confess to being an indie word snob. I don't like that word because it's a stupid trend and all the poseurs are saying it like they think it makes them sound intelligent. I've gotta maintain my dictionary cred.