Label DPI (dots per inch) is the resolution the printer prints your labels at. Most of the time, you will not need to change this from the default setting (300 DPI – standard for high quality printed images and labels), so no need to stress so much around this.
However, there are certain hardwares that will require you to change this standard setting to a specific one. For example, all Mac users that have a Zebra LP 2844 thermal printer, will need to change their DPI setting to 203.