MPLS technical definition:

MPLS is a widely supported method of speeding up IP-based data communications over ATM networks. As Frame Relay, IP, and ATM come together, the concept is that of “route at the edge and switch at the core”. In other words, routers are used at the ingress and egress edges of the network, where their high levels of intelligence can be best used and their inherent slowness can be tolerated.

Switches are used in the core of the network, where they can take advantage of the intelligent routing instructions provided by the routers, and where their inherent speed offers great advantage. MPLS takes this concept to new heights in an IP WAN such as the internet, much as does Cisco’s proprietary Tag Switching in the LAN domain (which is where MPLS grew out of).

MPLS works like this: As an IP data stream enters the edge of the network, perhaps using Frame Relay access, the ingress Label Switch Router (LSR) reads the full address of the first packet and attaches a small “label” in the packet header, which precedes the packet. (The label comprises 20 bits of the MPLS header, which comprises 4 or 8 octets). The Label Edge Switches (e.g., MPLS-capable ATM switches) in the core of the network examine the much abbreviated label, and switch the packet with much greater speed than if they were forced to consult programmed routing tables associated with the full IP address. All subsequent packets in a data stream are automatically labeled in this fashion...and very quickly, as they have been anticipated.

Further, the MPLS tag can be used to determine the most appropriate route, or Label Switched Path (LSP) for the data stream, in consideration of it’s nature and it’s explicit request for a differentiated Grade of Service (GoS). All packets that are forwarded in the same manner are known as Forwarding Equivalence Class (FEC). MPLS integrates OSI Layer 2 (Data Link) and Layer 3 (Network), with the result being simplified and improved packet data exchange within a complex packet data network such as the internet. Improvements in packet data exchange are achieved through path selection metrics including destination, available bandwidth, congestion, and error performance. MPLS offers great application in a wide variety of packet-based networks, including VoIP and VPNs.

One of the biggest advantages of MPLS is the elimination of multiple “layers” .. Typically most carrier networks employ an overlay model where SONET/SDH is deployed at Layer 1, ATM is used at Layer 2 and IP is used at Layer 3.  Using MPLS, carriers can migrate many of the functions of the SONET/SDH and ATM control plane to Layer 3, thereby simplifying network management and network complexity. Eventually, carrier networks may be able to migrate away from SONET/SDH and ATM all-together, which means elimination of ATM's inherent "cell-tax" in carrying IP traffic.

MPLS provides substantial cost savings over traditional wide area networking of multiple sites over long distances. Especially if they’re currently tied together using Point-To-Point Private Lines. Also, MPLS utilizes a fully meshed architecture so that each site is interconnected to one another, eliminating the inefficient hub and spoke concept of Frame Relay- where if the hub goes down, all sites go down with it.