Rich Rosen at O'Reilly Broadcast – Gmail's Labels Now More Like Folders: A Good Thing?:

"The common wisdom is that marking things with tags or labels (so you can later search for them by tag) is better than organizing them hierarchically into folders.

[…] The problem is that people don't seem to "get" labels or grasp what the inherent advantage is in not organizing things into folders. They WANT folders.

[…] Labels are much more flexible for organization and searching. It's a pity Google felt they needed to take a step backwards by saying "yeah, OK, these can be like folders, too, whatever." This is a failure resulting not from the feature's original design but from Google's inability to promote it and educate users about it."