Since I have 55+ labels, they used to take up a lot of room on the left side of my inbox.
If you want to clean up your sidebar and allow more room for other things (like chat and add-ins), you can hide certain or all labels from appearing on the left.
Go to Settings > Labels and choose Hide All or Hide on individual labels.
Now my sidebar looks like this (a little cleaner).
I can still click on one to show all emails with that label by clicking on the little arrow next to the number of labels and selecting a label, like this: