Visible labels on form fields or other UI components are important to help users identify what they are interacting with. For example, placeholder text is one way visible labels are not persistent. Once a user inputs data, the label is gone, which may be confusing when reviewing their information.
Non-persistent visible labels can affect general audiences, as well as people with disabilities. Users with cognitive disabilities may have difficulty remembering what a form field is used for if the label is not persistent. Additionally, people who use speech-to-text technologies may not be able to activate the form field without knowing what the form's label is.
Visible labels are easy to add to UI components. Using CSS to style the label can also make it appear as a placeholder that turns into a label.
For a more in-depth view of what is covered by the 3.3.2 Labels or Instructions guideline, read more from the W3C Labels or Instructions page