In order to forward a labeled packet, a LSR examines the label at the top of the label stack. It uses the ILM entry corresponding to this label to map it to an NHLFE. Using the information in NHLFE, it determines where to forward the packet and performs an operation on the packet's label stack. It then encodes the new label stack into the packet, and forward the result.
In order to forward an unlabeled packet, a LSR analyzes the network layer header, to determine the packet's FEC. It then uses the FTN to map this to an NHLFE.