According to the Gmail Blog,
1) New location for labels
You'll notice your labels in a new location on the left of your inbox (or on the right, for those of you using the Arabic, Hebrew, or Urdu versions of Gmail)
2) Label hiding and showing
You now have control over which of your labels show.
Now that is radical! It was actually a pain trying to fit both the labels and the "inbox" tag on my small 15" ancient CRT-based screen - this only makes life easier!
One drawback though: no right-side labels labs feature... except I never used that :P
Image source: The Gmail Blog