Multiprotocol Label Switching (MPLS)

a mechanism in high-performance telecommunications networks which directs and carries data from one network node to the next. MPLS makes it easy to create "virtual links" between distant nodes. It can encapsulate packets of various network protocols.
MPLS is a highly scalable, protocol agnostic, data-carrying mechanism. In an MPLS network, data packets are assigned labels. Packet-forwarding decisions are made solely on the contents of this label, without the need to examine the packet itself. This allows one to create end-to-end circuits across any type of transport medium, using any protocol. The primary benefit is to eliminate dependence on a particular Data Link Layer technology, such as ATM, frame relay, SONET or Ethernet, and eliminate the need for multiple Layer 2 networks to satisfy different types of traffic. MPLS belongs to the family of packet-switched networks.
MPLS operates at an OSI Model layer that is generally considered to lie between traditional definitions of Layer 2 (Data Link Layer) and Layer 3 (Network Layer), and thus is often referred to as a "Layer 2.5" protocol. It was designed to provide a unified data-carrying service for both circuit-based clients and packet-switching clients which provide a datagram service model. It can be used to carry many different kinds of traffic, including IP packets, as well as native ATM, SONET, and Ethernet frames.
A number of different technologies were previously deployed with essentially identical goals, such as frame relay and ATM. MPLS technologies have evolved with the strengths and weaknesses of ATM in mind. Many network engineers agree that ATM should be replaced with a protocol that requires less overhead, while providing connection-oriented services for variable-length frames. MPLS is currently replacing some of these technologies in the marketplace. It is highly possible that MPLS will completely replace these technologies in the future, thus aligning these technologies with current and future technology needs.
In particular, MPLS dispenses with the cell-switching and signaling-protocol baggage of ATM. MPLS recognizes that small ATM cells are not needed in the core of modern networks, since modern optical networks (as of 2008) are so fast (at 40 Gbit/s and beyond) that even full-length 1500 byte packets do not incur significant real-time queuing delays (the need to reduce such delays — e.g., to support voice traffic — was the motivation for the cell nature of ATM).
At the same time, MPLS attempts to preserve the traffic engineering and out-of-band control that made frame relay and ATM attractive for deploying large-scale networks.
While the traffic management benefits of migrating to MPLS are quite valuable (better reliability, increased performance), there is a significant loss of visibility and access into the MPLS cloud for IT departments.