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The new Gmail 2 interface allows you to apply colored labels instead of normal text labels. To apply colored labels, you should be using Gmail 2 interface and Internet Explorer 7 or Firefox 2+.

To apply colored labels, go to Labels list on left sidebar of gmail, and click on small icon in front of label name.

A little box will open enabing you to select a color for your label. After applying colored labels you’ll see that your labelled mails in Inbox have nice colored labels displayed before Subject.

To set a new label, simply open the email you wish to apply label and from More Actions select New Label.

Labels make it easier to search for your mails later. They are like folders organized for easy accessibility.