Labels are a lightweight way to group together resources that are related or associated. For example, a common practice is to label resources that are intended for production, staging, or development separately, so you can easily search for resources that belong to each development stage when necessary.

You could add labels to resources to form billing groups. You can apply labels to any of these resources—virtual machine instances, Forwarding rules (Alpha), Images, Persistent disks, Snapshots, Static external IPs, and VPN tunnels.

Labels are just key-value pairs and they correspond to tags in Azure; rather confusingly, GCP also has tags, but they apply only to VMs, and are used to specify which VMs in a network should be subject to a particular firewall rule and so on.