Luke 6

"And why do you look at the speck in your brother’s eye, but do not perceive the plank in your own eye?  Or how can you say to your brother, ‘Brother, let me remove the speck that is in your eye,’ when you yourself do not see the plank that is in your own eye? Hypocrite! First remove the plank from your own eye, and then you will see clearly to remove the speck that is in your brother’s eye." vv.41-42

Read chapter 6
Ouch!  A plank in my eye!  And how could I or anyone else miss seeing that?  It sounds like something you'd see in a Freak Show.  Well, yes this is just an illustration and not literal as it's impossible to just walk around with a plank in your eye.  Yet the exaggeration to our sin and judgement is well explained through this metaphor.  Metaphor of hypocrisy and that especially among believers.
How often do we not perceive our own sin, the plank in our eye, that is so obvious to others?  Or who do you know that doesn't perceive their own plank in their eye?  How often are you criticizing other's lack and sin and not dealing with your own?  Now it's not telling us don't call someone out in their sin as we need to do that to grow in our walk with the Lord and turn from sin, but the Lord was telling the disciples not to condemn sin if they were committing worse sin.  How hypocritical would it be for someone who is having sex with multiple women condemn someone who for the first time had sex before marriage?
The verse (37) just before these says, "Judge not, and you shall not be judged. Condemn not, and you shall not be condemned. Forgive, and you will be forgiven." 

These statements all applied to those to whom Christ was speaking at that time. They were to act in this unusual and startling manner while they were in His company as His disciples. This was God’s plan for them at that time. Moreover, this will be the way things are in the kingdom of God. In that day, God will be making the judgments, and He will be setting men up or pulling them down as He sees is right. For one to judge or condemn in that day, then, when God has not judged or condemned would be to question the very judgment of God. Needless to say, that would not be a good thing to do under God’s government. (precepts.wordpress.org)

No, this is not how we are to act. If we were to never condemn evil, then how could we ever fight against it? If we were never to try to judge and set things right, how would wickedness ever be stopped and justice served? Moreover, if we are not forgiven if we do not forgive, what good is the blood of Christ? We must not try to apply these words to ourselves today of not judging, but we should learn well how to rid hypocrisy when calling out sin.