P2 will perform penultimate hop popping (PHP). PHP is used for directly connected and summarized routes to optimize Multiprotocol Label Switching (MPLS) networks. When PHP is used, the next-to-last router will remove, or pop off, the MPLS label so that the nexthop egress router does not have to perform two table lookups. The removed label is actually an implicitnull label. When the egress router sees the implicit null label, it will forward the packet based on information in the Forwarding Information Base (FIB).
P1 receives routes to 172.16.1.0/24 and 172.16.2.0/24. P1 tells P2 that P2 should remove the label on packets destined for these two networks. P2 will generate a label for the route and advertise it to P3. Similarly, P3 will generate a label for the route and advertise it to P4.
P4 will not perform PHP. When P4 receives a packet destined for 172.16.1.8, it determines that the packet is destined for the 172.16.0.0/16 network. P4 consults the FIB, labels the packet with the label advertised by P3, and forwards the packet to P3.
P3 will not perform PHP. When P3 receives the packet, it consults the Label Forwarding Information Base (LFIB), swaps the label with the label advertised by P2, and forwards the packet to P2. When P2 receives the packet, it will consult the LFIB, pop the label, and forward the packet to P1. P1 receives the packet and forwards the IP packet to C1.