Labels are simply strings that are meaningful to the project members, but that have no particular meaning to the issue tracker itself. For example, you could label an issue as "Hot" if you like.
When an issue label has a dash in it, e.g., "Priority-Medium", then that is interpreted as a key-value pair that can be used like a custom field. The prefix before the first dash is the key, and the part after it is the value. You can configure the issue list to show a column for any prefix. And, you can search for values within a specific custom field by using "prefix:value".