If you've used other email services, you may have used folders to organize your inbox. You could move emails into a folder manually, or by creating a filter to automatically sort everything that came in.
Labels in Gmail are similar to folders, allowing you to manually or automatically sort your email. Just like folders in other email services, your labels will be listed in the left pane, allowing you to click a label to view all of its emails. Unlike folders, however, you can apply multiple labels to a single message, allowing you to effectively keep it in several places at once.