Explanation/Reference:
Explanation:
MPLS VPN functionality is enabled at the edge of an MPLS network. The PE router performs these tasks:
Exchanges routing updates with the CE router

Translates the CE routing information into VPN version 4 (VPNv4) routes

Exchanges VPNv4 routes with other PE routers through the Multiprotocol Border Gateway Protocol

(MP-BGP)
A PE router binds a label to each customer prefix learned from a CE router and includes the label in the network reachability information for the prefix that it advertises to other PE routers. When a PE router forwards a packet received from a CE router across the provider network, it labels the packet with the label learned from the destination PE router. When the destination PE router receives the labeled packet, it pops the label and uses it to direct the packet to the correct CE router. Label forwarding across the provider backbone is based on either dynamic label switching or traffic engineered paths. A customer data packet carries two levels of labels when traversing the backbone ReferencE. http://www.cisco.com/c/en/us/td/ docs/routers/asr9000/software/asr9k_r4- 2/lxvpn/configuration/guide/vcasr9kv342/vcasr9k42v3.html