Type in Photoshop is rasterized when saved as PSD or EPS. If you want it to remain as vector type, save as PDF. That's not to say that if you open a PSD with live type in Photoshop that the type is no longer type, but when placed into InDesign, it is raster data if it's a PSD.
Of course, the real question is why you are creating labels in Photoshop?
By the way, if you have lots of PSD files that you would like to convert to PDF, you can do it with an action or a droplet, and the job will be done very quickly with little effort.
Thanks for you reply. The EPS was as clear as the PDF.
I occasionally use the action/batch feature, but I'm a bit scared to use it on 500+ files in several different subfolders.
In response to your question: I didn't create the labels and my first question was exactly the same as yours.
Actually, I don't think EPS automatically converts to raster when created in Photoshop, because EPS can contain a combination of vector and raster data. The thing I was remembering was that when you go to open the eps again back in Photoshop, it will rasterize, so that's not a really good way to go if you want to edit the type at some point. When opened in Illustrator, my quickie experiment showed that the type was no longer live, but outlined to vector shapes. If you use the high-quality display in InDesign, the vector outlined text will look better than the rasterized type of a PSD, but vector type doesn't have all of the qualities of live type, like you have in a PDF.
By the way, you can build into your action to save the PSD into a particular folder and close the file, so all you have to do is drag it from the sub-folder it's in onto the droplet, then drag the PDF copy to the sub-folder where the PSD is. You can then choose between the PSD and the PDF from within the same sub-folder, which might make organization better for you. Or, just have a single PDF folder for all 500+ images. How ever it works best for you.
The thing I was remembering was that when you go to open the eps again back in Photoshop, it will rasterize, so that's not a really good way to go if you want to edit the type at some point.
I think the same is true of PDF—if you need to keep the text live for future edits in PS then you would have to keep a copy of the PSD.
Not so, as long as you save the PDF from Photoshop and check the box to maintain Photoshop editability.