I have a linked shp file, for which I wish to display attribute based labels. Create labels seems to be greyed out. How do I go about this.
Make a copy of the drawing and paste it to local .map file. This will let you change styling and derive a Label layer from it using the local copy.
To expand on this a bit:
When you link a shapefile, you create a data source. OK. Suppose you now want to create labels on that shape drawing. If you try to do that by right-clicking on the shape drawing, by right-clicking on that shape drawing you've moved the focus into the data source. It doesn't provide an option to create labels because you can't create labels within that data source, which is a shapefile. Shapefile format doesn't allow you to create other components within shapefiles.
What you can do is what oeaulong recommends: copy the drawing and paste it outside of the data source into the main part of your project. Then, when you right-click on that drawing the focus is in the main part of the project, where you can create whatever you want.
Note that when you copy the drawing, you're not copying the shape table. You're just creating a drawing in the main part of the project which still takes its data from the shape table that is inside the shapefile data source.