This one boils down to scan-ability and expectations.
Generally, the label is outside the input field because it signifies what goes inside the field. It also serves as an anchor for the eye. Essentially, the space inside the field is for the user, the space outside the field is for the explanation on what is expected to go inside that box.
Placeholder text inside an input field is already often mistaken for a default answer. Imagine the confusion if the label is inside instead. It comes down to people thinking the text inside a field is their part of the conversation. If there's something in there, whether placeholder hints or labels, there will be a chance a user will skip over the field thinking their part is done there already. Many people ignore input fields that look pre-filled, as their eye is scanning for labels and empty boxes. Not everyone does this, but enough do that warrants being careful with this.
Here's an interesting article about the use of placeholders. Similar principles applies to labels inside a field.