There are many ways to make labels. I usually use EQ7 to design the label, then print it on sheets in a package sold by Printed Treasures, which I buy at JoAnn's.
http://www.google.com/products/catal...ed=0CHIQ8wIwBQ#
Sometimes I use the embroidery machine to make labels instead. You can also use a permanent marking pen to hand letter your labels. Lots of options, depending on what you have on hand and what you like to do.