MPLS adds a 32-bit label to each packet to improve network efficiency and to enable routers to direct packets along predefined routes in accordance with the required quality of service. The label is added when the packet enters the MPLS network, and is based on an analysis of the packet header. The label contains information on the route along which the packet may travel, and the forwarding equivalence class (FEC) of the packet. Packets with the same FEC are routed through the network in the same way.
Routers make forwarding decisions based purely on the contents of the label. This simplifies the work done by the router, leading to an increase in speed. At each router, the label is replaced with a new label, which tells the next router how to forward the packet. The label is removed when the packet leaves the MPLS network.
Modern ASIC-based routers can look up routes fast enough to make the speed increase less important. However, MPLS still has some benefits. The use of FECs allows QoS levels to be guaranteed, and MPLS allows IP tunnels to be created through a network, so that VPNs can be implemented without encryption.