Labels add lightweight classification
Labels can identify categories such as bug, enhancement, documentation, priority or area of the application. Keep the label vocabulary small enough that contributors understand it.
Milestones group work
Milestones can represent a release, project phase or target outcome. Assigning issues to a milestone gives the team a simple view of what remains.
Do not over-organize
Too many labels and overlapping categories make project management harder. Define a small set of labels that answer useful questions.