Health diagnosis of the rotating machinery can identify potential failure at its early stage and reduce severe machine damage and costly machine downtime. In recent years, the adaptive decomposition methods have attracted many researchers’ attention, due to less influences of human operators in the practical application. This paper compares two adaptive methods: local mean decomposition (LMD) and empirical mode decomposition (EMD) from four aspects, i.e., local mean, decomposed components, instantaneous frequency, and the waveletlike filtering characteristic through numerical simulation. The comparative results manifest that more accurate instantaneous frequency and more meaningful interpretation of the signals can be acquired by LMD than by EMD. Then LMD and EMD are both exploited in the health diagnosis of two actual industrial rotating machines with rub-impact and steam-excited vibration faults, respectively. The results reveal that LMD seems to be more suitable and have better performance than EMD for the incipient fault detection. LMD is thus proved to have potential to become a powerful tool for the surveillance and diagnosis of rotating machinery.