Google is making a change in Gmail today to make it easier to handle long label names — with this change you can now add and edit label names up to 225 characters.
“The old limit was 40 characters, which was not enough for some people who had switched from Outlook or accessed Gmail through IMAP,” stated Google.
Label names can get really long, especially when you use Nested Labels. When that happens, Gmail will shorten them if necessary to avoid cluttering your view.
You can always mouse over to see the full label name and use colors to better distinguish your labels from each other.
[Source: Gmail blog]