The wording of this question implies that the answer is subjective, and indeed, it is never explicitly stated why Min laughs in this particular moment. We can, however, make a pretty good guess.

Every potter in the village is vying for the royal commission, as it represents a huge increase in wealth and prestige, not to mention honor. Tree-Ear has noticed repeatedly that Kang has been sneaking to and from the kiln as though he is hiding something. Unable to contain his curiosity, Tree-Ear spies on Kang and discovers that he has developed an innovative technique for applying gorgeous inlay-work to his pottery.

When Kang goes public with this knowledge. Tree-Ear tells Min that he thinks the inlays are ugly. Min laughs at this because he is taken aback by the boy's kindness, even if it is a bit naive. Min knows that the inlays are beautiful. That fact is plain enough for anyone with eyes to see. Tree-Ear calling them ugly is proof of his devotion to Min and his regard for his master even in the wake of a new and exciting artistic breakthrough on the part of another potter. Perhaps Min knows at this point that, though it would not be keeping with tradition, he would have a true disciple in Tree-Ear.