Now it is time to create some label. Name label with slashes (/) to make it the child of another. As example, let's say you wanted to create a simple hierarchy with a "Home" label, and inside it a "Members" and a "Jobs" label. Just create three labels with the following names:
If you want, you can then create "Home/Members/Kids," "Home/Pets," etc.
In Gmail blog official said that :
You can create complex hierarchies of labels if that's the way you like to organize your mail, and you can expand/collapse labels to save space. You'll always be able to tell whether a given label contains unread messages in its collapsed child labels by looking at whether it's bold or not.Read more tweaking at Gmail blog.