Hi Rob,
A
X X
Data Data Data
R8--------R4--------R6--------R5
|
|
| Y
| Data
|
|
R3--------R1--------R2--------R7
B Z Data
Z Data
Data
In this case (Option-B Inter-AS VPN), ASBRs (R3 and R5) will advertise their own label to each other for every unique labeled route that is received from its internal peers.
Let an example where a packet is being sent from R8 to R7.
Upon receiving data from R8, R4 will PUSH VPN label say (X) and then MPLS transport label say (A) on top.
When this is received by R6 and since you have implicit null, R6 will pop top label and will switch it to R5.
On R5, X label would be swapped with another label Y as advertised by R3 for that VPN destination.
Now R3 will swap Y with a label that is advertised by R2 (say label Z) and then it will push MPLS transport label on top (say label B) to ensue the next-hop router can switch the packet to R2. When R2 receives it, it will forward based on the top label Z which would be the VPN label.
[1] Now from forwarding-plane prespective, it doesn't distinguish between MPLS and VPN label, hence you have to enable "family mpls" under interfaces to ensure they process label-tagged packets. And since RE had to generate label for VPN prefixes between ASBRs, you need "protocol mpls" for ASBR connecting interface.
[2] As I described above, when the packets transverse between R5 and R3, there is only one label and that would be swapped accordingly so that the neighbor ASBR can understand the packet.
Regards
Surya