Measurement in $Y$ basis means that we want to measure is the qubit in $|+i\rangle$ state or $|-i\rangle$ state which are eigenbasis vectors for $Y$ gate. Because they are eigenbasis vectors we can express any $|\psi_1 \rangle$ state in this form:
$$| \psi_1 \rangle = \alpha_{+i} |+i\rangle + \alpha_{-i} |-i\rangle$$
where $|\alpha_{+i}|^2$ is the probability of measuring $|+i\rangle$ state and $|\alpha_{-i}|^2$ is the probability of measuring $|-i\rangle$. And
\begin{equation}
|+i\rangle = |0\rangle + i |1\rangle
\qquad
|-i\rangle = |0\rangle - i |1\rangle
\end{equation}
Now when we apply $HS^{\dagger}$ to $|\psi_1 \rangle$ state, we will obtain:
$$| \psi_2 \rangle = \alpha_{+i} |0\rangle + \alpha_{-i} |1\rangle$$
Then, with $|\alpha_{+i}|^2$ we will measure $|0\rangle$ (the same probability that we had for $|+i \rangle$ measurment in the initial $|\psi_1\rangle$), and with with $|\alpha_{-i}|^2$ we will measure $|1\rangle$ (the same probability that we had for $| -i \rangle$ measurment in the initial $|\psi_1\rangle$). For any gate that will do $U |+i\rangle = e^{i \varphi_1} |0\rangle$ and $U |-i\rangle = e^{i \varphi_2}|1\rangle$ mapping (where $\varphi_1$ and $\varphi_2$ are some phases that will not have any influence on probabilities), we will have this correspondence. For example, if I understand this Riggeti's code right, they are doing $Y$ basis measurement by applying firstly $U = R_x(\pi /2)$ gate that maps $R_x(\pi /2) |+i\rangle = |0\rangle$ and $R_x(\pi /2) |-i\rangle = -i|1\rangle$.
The other thing is to measure the expectation value of $Y$ operator:
$$\langle \psi_1 | Y | \psi_1 \rangle = |\alpha_{+i}|^2 - |\alpha_{-i}|^2$$
that can easily be calculated after enough measurements in the $Y$ basis. Here we took into accout that $Y|+i\rangle = (+1)|+i\rangle$ and $Y|-i\rangle = (-1)|-i\rangle$. $|\alpha_{+i}|^2 = \frac{N_{+i}}{N}$ and $|\alpha_{-i}|^2 = \frac{N_{-i}}{N}$, where $N$ is the number of measurements, $N_{+i}$ is the number of $| +i \rangle$ measurements, and $N_{-i}$ is the number of $| -i \rangle$ measurements.
I guess in the paper they mean expectation value of $Y$ operator, not just one simple measurement in the $Y$ basis, because of this line "Our predicted label value is the real number between $−1$ and $1$... which is the average of the observed outcomes if $Y_{n+1}$ is measured in multiple copies of...".