MPLS stands for "Multi Path Label Switching" and is a relatively new technology that only operators of large networks will come across. It is a technology to separate different traffic flows in IP networks. One put an extra label on the IP packet and will then be abel to switch the packet in an efficient way through the network and it will also be possible to switch different flows on different paths.

MPLS can be used both on Ethernet level and IP level in the network and for large operators the technology is used to separate different customers from each other in the same network structure (VPN). The traditional IP router can only hold one routing table containing the path to different networks, with MPLS it is possible to hold several routing tables in one router and that way route traffic for different users on different paths. MPLS is also used to reserve capacity and manage traffic thru the network for sensitive traffic like telephony.

In the same way one can in Ethernet switches use MPLS to differ unique flows and announce how different flows is reached. This way it is possible to avoid loops in the network with redundant lines just like IP-traffic.

There is a document describing more about MPLS on the link MPLS FAQ