Good question!
In days before, a label would represent, in addition to their style, a level of quality and craftsmanship. Their popularity depended on their (maintained) reputation.
The above still holds true for many, but these days, labels have taken a new role as... labels that are supposed to 'classify' the human wearing them. It doesn't matter if that bag is a real Chanel or a cheap imitation, the logo does most of the talking... and most of those wearing it know nothing about the brand or its history, they only know that other 'popular' people are wearing it.