This technology enables very fast data switching. For IP routers, it is usually necessary to examine packets at the source and destination addresses so that the router control function can determine the optimal interface to send packets to the destination using a routing table. Unfortunately, this takes time, but IP/MPLS engineers have come up with an alternative, encapsulating the IP packet in a header packet, hence the switching of the headers.
This means that the router no longer forwards packets based on a software-dependent and lengthy lookup in the routing table, but quickly switches packets based on the label. This brings huge performance benefits as well as flexibility. The multi-protocol part of the name is derived from the fact that encapsulating packets using MPLS labels means that anything can be transmitted over an MPLS network regardless of the underlying protocol.