Mudstone is a fine grained sedimentary rock made up of muds and clays.  Grains are so fine they can only be seen with the aid of a microscope.  Mudstone is formed as tiny grains of mud and clay are deposited in water and sink to the bottom.  Over time the grains become buried by sediment and are slowly compacted and during this process the water is squeezed out.  As the particles dry out and harden mudstone is formed.