This quick animation shows what one is doing when creating “nested labels” in Google Apps Mail. The idea of nested labels is that similar to subfolders. With that in mind, consider the way Google Apps Mail/Gmail use labels instead of folders, thus nested labels are labels within labels. (The tree analogy of Gmail conversations and labels: A single conversation can flow back and forth through time and thus widen the discussed on one topic (The tree trunk -grows wider the more conversations grouped in the same subject; as you start to organize your conversation, one can apply several labels to that conversation- the main branches of the tree; as you start to further organize your mail conversation, one may create a nested label or label within a label –the branches nested off other branches or labels)
This video shows some ways to create/organize your nested labels. Make sure you enable the nested labels in the lab setting.