You’re labeling attributes or subject matter in that picture so that in the future, you can recall that picture based on one of those things. It’s the same general idea as tagging photos on Facebook or in a looser sense, using a hashtag on Instagram. Labeling them with keywords is more of a way to connect photos across different categories, which makes it easy to recall the ones you want when you’re ready.
Folders are a way of grouping and categorizing your images. That’s because a lot of people don’t really understand how systems like keywords, tags, and labels work. This may seem redundant after talking about folders.