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Google Apps Labels are similar to folders you may have used in other email systems. The biggest - and most useful - difference is that you can give one message multiple labels rather than having to make copies of a message if you wanted to store it in multiple folders. It's similar to the way tagging works in social networking and other collaborative websites. Once you've created a label, you can view all the messages with that label by searching, or by clicking the label name on the left side of any Gmail page.
Here's some basic information about using and managing labels.
Any currently-selected messages will automatically be categorized under your new label. You can remove a labeled conversation from your inbox by archiving it; you can then view it later by clicking All Mail, or by clicking the label name along the left side of any Gmail page.
To apply a label to any message, select the checkbox next to the message(s) in question, and then select the label name from the Labels drop-down menu; you can also label a single message while you're reading it by using the drop-down menu, or drag a message to a label's name.
All the messages categorized under your old label name will now be categorized under your new label.
You can control which labels appear in your list on the left of the screen.
You can also show, hide, or delete one label at a time by clicking the down-arrow to the left of that label.
Note: If you have more than 100 labels, either because you created them or they appeared after migrating from another email system, you may find that your email runs more slowly. It's a good idea to periodically review your labels and remove or retire any that you're not using any more. The maximum number of labels that can be used at any one time is 500.
You can apply more than one label to a conversation or message. Messages will show up under each label with which they are tagged. For example, if you had an email related to a travel reimbursement, you would have had to make a decision about whether to file that message under Travel or Expenses. With Google Apps, you can apply BOTH labels to the message.
Nested labels are the equivalent of subfolders. To create nested labels in Google, first create the top-level folder name - for example, Family. Then you can create individual "sub-labels", for example for different family members. You'll find detailed instructions for creating nested families of labels here and in our Advanced Use of Labels video tutorial: