The term "in mould labelling" is directly derived from the technique: a preprinted polypropylene (PP) label is placed in a mould. This mould has the shape of the end product, e.g. the shape of a butter tub.
Then the molten PP is added to the mould. It fuses with the label, and while curing, takes the shape of the mould. Result: label and packaging become one.