Labels are intended for graphic text manipulations whereas paragraphs are for the placement of bodies of text on the page.
When editing a label changes made to the text will affect all of the characters in the text.
When editing a paragraph individual changes can be made to the characters in the text.
The text in a paragraph cannot be graphically manipulated in as many ways as the label (e.g. rotation, states, etc.) but does have all the editing options of rich text (bold, italics, etc.).