"Proprietary" labels are those with markings associating them with certain brands, while "generic" ones lack those features. The markings appear in different forms on the label's liner, such as black squares or rectangles, oval slots, etc. Some proprietary tags also come in sizes that cannot be used in other machines.
The use of proprietary labels does not in any way enhance a machine's performance. However, the unit's sensor needs the markings so it can function. Brother and Dymo are the ones in the industry that normally use proprietary labels. Other direct thermal printers run well even if they only use generic stickers.