Being an (amateur) trumpet player myself, this scene also caught my attention immediately. Apart from the LFO / Abbado M3 performance in London which I attended, the only other occassion I witnessed where the brass section of a symphony orchestra used cloths as "mutes" was at a Berlin Phil. concert featuring Stravinsky pieces a few weeks after the TV broadcast of the Abbado concerts in Germany (maybe they had been watching
).
I tried it myself with this very same, much feared and brutally difficult chorale part at the end of M3: The effect is that it takes a bit more air to produce an audible sound at all even at "ppp" level (as Mahler indicates) - so in this case you would be allowed to play just a bit louder (and therefore slightly more comfortably) yourself while the sound heard is still of the the utmost pianissimo. This can be of some help as the passage in question is really terribly "open" for the trumpets, with the first part rising to high "b" as softly as possible.
On the other hand: In case of the trumpeters involved in the LFO, we're talking of world class musicians and Reinhold Friedrich (principal) could play anything at any given level of volume. So my guess would be that Abbado wanted it to be *extremely* soft so they decided to use those black cloths.
This method by the way can be quite hard to get across properly, as a cloth too thick can a) muten and distort the sound so much that it becomes really nasty, and could b) cause very serious intonation issues, while on the other hand a cloth too thin has virtually no effect at all.
Hope this helps a bit.
p.s.: I don't think this method has any specific name. It really is an extremely rare thing.
p.p.s.: As far as I know, Mahler doesn't prescribe anything like that at this part of the symphony. The only things concerning the trumpets written at rehearsal figure 26 are: "Sehr langsam. 1. Tromp. zart hervortretend. Sehr getragen und gesangvoll." (that is: "Very slowly. Principal trumpet emerging a bit, but tenderly. Very solemn and chant-like.") and "sempre ppp" and "molto portamento".