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MPLS works by tagging a packet with an identifier (a label) to distinguish the LSP, or "label switched path." When a packet is received, the router uses this label (and sometimes also the link over which it was received) to identify the LSP. It then looks up the LSP in its own forwarding table to determine the best link over which to forward the packet, and the label to use on this next hop.
A different label is used for each hop, and it is chosen by the router or switch performing the forwarding operation. MPLS routing allows the use of very fast and simple forwarding engines, as the router can select the label to minimize processing and maximize efficiency. Since MPLS uses only the label to forward packets, it is protocol-independent, hence the term "Multi-Protocol" in MPLS.
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