Other posters have discounted the performance advantages of the concept of tag/label switching, but as I originally noted although they don't have the impact they originally did, they are still somewhat present to some degree. (If I recall correctly, the primary motivation for the concept was also for performance.)
From http://www.cisco.com/univercd/cc/td/doc/cisintwk/ito_doc/mpls_tsw.htm
"From the previous description of the forwarding component, we can make several observations. First, the forwarding decision is based on the exact-match algorithm using a fixed-length, fairly short label as an index. This enables a simplified forwarding procedure, relative to longest-match forwarding traditionally used at the network layer.
This, in turn, enables higher forwarding performance (higher packets per second). The forwarding procedure is simple enough to allow a straightforward hardware implementation. A second observation is that the forwarding decision is independent of the label's forwarding granularity. The same forwarding algorithm, for example, applies to both unicast and multicast: A unicast entry would have a single (outgoing label, outgoing interface, outgoing link-level information) subentry, while a multicast entry might have one or more subentries. This illustrates how the same forwarding paradigm can be used in label switching to support different routing functions.
The simple forwarding procedure is thus essentially decoupled from the control component of label switching. New routing (control) functions can readily be deployed without disturbing the forwarding paradigm. This means that it is not necessary to reoptimize forwarding performance (by modifying either hardware or software) as new routing functionality is added."
Less work to accomplish a function is usually faster whether done in software or hardware, although with hardware the deltas often narrow. Also, often simpler function hardware is less expensive.
I will agee with the other posters that other features provided by MPLS have become more important.
