How to Use the Filter “sidebar_login_widget_form_args”

You probably need to check again how to use WordPress filter. On your code, you haven’t used the variable what sidebar_login_widget_form_args will pass to your function as argument. Please check below –

/* Sidebar Login Plugin - Change Form Labels */
add_filter( 'sidebar_login_widget_form_args','my_sidebar_login_widget_form_args', 10, 2);
function my_sidebar_login_widget_form_args( $args ) {
    // this is how you will change the argument values, using key
    $args['label_username'] = 'My Username'; // Change Username Label
    $args['label_password'] = 'My Pass'; // Change Password Label
    $args['label_log_in'] = 'My Log In'; // Change Login Button Label

    // after filter is done, you will return it
    return $args;
}

And make sure, your first line opening comment tag has a closing. Check the difference of my line and yours.