Working with the Standard Label Engine
When you turn on dynamic labeling, the Standard Label Engine fits as many labels as possible, without overlap, within the available space on the map. Label placement works with the space available for a feature. If a feature is only partially visible at the edge of your map, the Standard Label Engine tries to place its label using the visible portion of the feature. As you pan and zoom, the Standard Label Engine automatically adjusts labels to fit the available space and the available portion of the feature. For many maps, the default labeling will be adequate. If you need more control over which features are labeled and where labels are placed, you should work with priority, weight, overlap, and placement options. Additionally, if you are labeling line or multipart polygon features, you might want to work with duplicate labels. All these properties work on a label class level.
If further control is needed in placing labels, the Maplex Label Engine can be used.
As you zoom in and out on your map, the size of your labels will not change. If you want label text size to scale with the map, right-click the data frame and click Reference Scale.
Standard Label Engine placement options
Label placement options control the positioning of labels with respect to features. For example, you might specify that your city labels always be placed above and to the right of the cities.
If you enable the Maplex Label Engine, you will see a different set of label placement options.
Prioritizing your labels controls the order that labels are placed on the map. Labels with a higher priority are generally placed before labels with a lower priority. Also, lower-priority labels that conflict with higher-priority labels might be placed at alternative positions or dropped from the map.
When placing labels with the Standard Label Engine there is always competition between the labels for space. Setting up conflict detection rules determines which labels are placed when multiple labels are vying for the same location.
Weighting labels and features
Label weights and feature weights are used to assign relative importance to labels and features. This weight is to be used only when there is a conflict, that is, an overlap between a label and a feature. The general rule is that a feature cannot be overlapped by a label with an equal or lesser weight.
The buffer ratio effectively makes the label size larger than the actual text, thus preventing labels from being placed close to each other.
Place overlapping labels
Specifying this option will force placement of a label for each feature in this label class regardless of whether they overlap each other. By default, ArcMap automatically resolves conflicts between labels and does not allow them to overlap. You can change this behavior by using the Place overlapping labels option for a label class.