Annotation means that your web page contains metadata about its text in the mark up. For qLabel, you can annotate a piece of text with a unique identifier, a URI, that identifies what the given text is about.
For example, you might say "I visited Vienna last year." You could annotate the "I" with a URI for yourself, "Vienna" with a URI for Vienna, Michigan, using e.g. the Wikidata identifier Q7928351 (or Q7928354, in case you meant the other Vienna, Michigan), and "last year" with an URI for the year. This makes it much easier to understand what this sentence is about (indeed, not only for the machine, as you have seen) and makes the context more explicit.
Annotations can be useful well beyond of the service that qLabel offers, e.g. for a better search and for natural language processing, because now it is explicitly stated that this sentence is not about Vienna in Austria or Virginia, nor the Billy Joel song.
With qLabel, we annotate the text in order to allow for the correct translation. For example, the Austrian Vienna would be translated to Wien in German, and to Bécs in Hungary, whereas the song or one of the US cities would remain untranslated.
qLabel uses the its-ta-ident-ref attribute from the
W3C ITS 2.0 recommendation.
It is unfortunately a horrible attribute name that no one can remember.
It stands for Internationalization Tag Set (ITS)
Text Annotation (TA)
Identifier reference.
Wikipedia has a decent article on annotation.