Refactor labels docs

doc/workflow/labels.md

 # Labels
 
-In GitLab, you can easily tag issues and Merge Requests. If you have permission level `Developer` or higher, you can manage labels. To create, edit or delete a label, go to a project and then to `Issues` and then `Labels`.
+Labels provide an easy way to categorize the issues or merge requests based on
+descriptive titles like `bug`, `documentation` or any other text you feel like
+it. They can have different colors, a description, and are visible throughout
+the issue tracker or inside each issue individually.
 
-Here you can create a new label.
+With labels, you can navigate the issue tracker and filter any bloated
+information to visualize only the issues you are interested in. Let's see how
+that works.
 
-![new label](labels/label1.png)
+## Create new labels
 
-You can choose to set a color.
+>**Note:**
+A permission level of `Developer` or higher is required in order to manage
+labels.
 
-![label color](labels/label2.png)
+Head over a single project and navigate to the label page by clicking on
+**Labels** in the left sidebar.
 
-If you want to change an existing label, press edit next to the listed label.
-You will be presented with the same form as when creating a new label.
+The first time you visit the **Labels** page you'll notice that there are no
+labels created yet.
 
-![edit label](labels/label3.png)
+![Generate new labels](img/labels_generate.png)
 
-You can add labels to Merge Requests when you create or edit them.
+---
+
+You can skip that and create a new label or click that link and GitLab will
+generate a set of predefined labels for you. There 8 default generated labels
+in total and you can see them in the screenshot below.
+
+![Default generated labels](img/labels_default.png)
+
+---
+
+You can see that from the labels page you can have an overview of the number of
+issues and merge requests assigned to each label.
+
+Creating a new label from scratch is as easy as pressing the **New label**
+button. From there on you can choose the name, give it an optional description,
+a color and you are set.
+
+When you are ready press the **Create label** button to create the new label.
+
+![New label](img/labels_new_label.png)
+
+## Create a new label right from the issue tracker
+
+>**Note:**
+This feature was introduced in GitLab 8.6.
+
+There are times when you are already in the issue tracker searching for a
+label, only to realize it doesn't exist. Instead of going to the **Labels**
+page and being distracted from your original purpose, you can create new
+labels on the fly.
+
+Just hit **New Label** from the dropdown list, provide a name, pick a color
+and hit **Create**.
+
+![Create new label on the fly](img/labels_new_label_on_the_fly_create.png)
+![New label on the fly](img/labels_new_label_on_the_fly.png)
+
+## Assigning labels to issues and merge requests
+
+There are generally two ways to assign a label to an issue or merge request.
+
+---
+
+You can assign a label when you first create or edit an issue or merge request.
+
+![Assign label in new issue](img/labels_assign_label_in_new_issue.png)
+
+---
+
+The second way is by using the right sidebar. Expand it and hit **Edit**. Start
+typing the name of the label you are looking for to narrow down the list and
+select it. Once done, click outside the sidebar area for the changes to take
+effect.
+
+![Assign label in sidebar](img/labels_assign_label_sidebar.png)
+![Save labels in sidebar](img/labels_assign_label_sidebar_saved.png)
+
+---
+
+To remove labels, follow the same procedure like when adding them and hit the
+little **x** mark next to each one.
+
+##  Use labels to filter issues
+
+Once you start adding labels to your issues, you'll see the benefit of it.
+Labels can have several uses, one of them being the quick filtering of issues
+or merge requests.
+
+Pick an existing label from the dropdown _Label_ menu or click on an existing
+label from the issue tracker. In the latter case, you also get to see the
+label description like shown below.
+
+![Filter labels](img/labels_filter.png)
+
+## Subscribe to labels
+
+If you don’t want to miss issues or merge requests that are important to you,
+simply subscribe to a label. You’ll get notified whenever the label gets added
+to an issue or merge request, making sure you don’t miss a thing.
+
+![Subscribe to labels](img/labels_subscribe.png)
+
+If you work on a large or popular project, try subscribing only to the labels
+that are relevant to you. You’ll notice it’ll be much easier to focus on what’s
+important.