This activity is used to essentially create "cliques" within your classroom. Each student has a label placed on their head and then has to mingle with the rest of the class, with each student doing whatever each person's label requires them to do.
I use this as a form of character study, discussing what it was like to have each label, which characters appear to have each label, and how that affects the characters. This could also be used for lessons on appropriate social interaction as well.