thought: if good, go to grasping. if bad, go to repressing. if neutral, ignore.
grasping: increment mood, repeat until fail. go to fail //always fail
repressing: repeat until fail. go to fail. //always fail
fail: decrement mood, goto thought.
As I understand Theravada, it's about observing what is happening rather than stopping or nullifying; so thought -> observe -> repeat is quite appropriate for it.
Theravada Buddhist Practitioner here. In addition to daily meditation practice, I've attended 8 months worth of meditation retreats in the last 4 years. These retreats consisted of 8-15 hours a day of formal meditation (depending on how hard I was going at it) with an effort to continuity of mindfulness in between formal sessions. At this point, I estimate I have about 3-4k of my 10k hours required for high mastery.
My understanding of the purpose and benefit of practice is to observe experience as it arises (whether physical sensations, sensory input or thoughts) as it arises and see how you react to it.
One key insight you find is we tend to contract toward things that are pleasant and contract away from experience that is unpleasant and space out (or seek distraction) during experience that is neutral or boring. A cognitive understanding of this contraction and spacing out is insufficient to decondition the human brain from doing it. The conditioning is too deep.
It requires using concentration and mindfulness as a microscope on our perception to see and feel the additional pain we create in the contraction. As we repeatedly connect with the pain of contraction we slowly over time stop doing it and begin to experience life in a whole new way. The capacity to face pleasant, unpleasant and neutral experiences without contracting or spacing out is quite literally a life changer.
The Mahayana tradition (in particular Zen) is the one that focuses more on not doing; where-as Theravada very much puts forth the practice as an act of doing. The usual language is to "turn towards" what is happening, not to simply "be one" with it.
The default state machine
The enlightened state machine http://www.urbandharma.org/pdf/mindfulness_in_plain_english....