Labels are important even when speaking of another person however, and sometimes you must go off of what you know, no insult meant to the subject person.
Oftentimes in the past I would refer to a person on this forum as a He by default. I mean no disrespect, Its just that the majority of the forumgoers last I saw the demographics identified as a he. I try these days to use more gender neutral terms, but sometimes I get into little waterfalls of thought and just type without thinking too much of exactly what words I'm using.
People applying labels to someone else is a natural part of language as well. If I call someone by the wrong pronoun, its not that I mean something negative by it, its that a descriptive word is necessary and at some point assumptions need to be made. When I'm talking with someone else about someone, I'll use words like trans, gay, and bi, as appropriate to my knowledge. Sometimes you do have to apply labels to someone else. Sometimes those labels do not fully fit no-one's vocabulary is perfect, it's important to know when someone is intending to be derogatory and when someone is simply using the best terms that fit that they know.
For example, my own gender identity. I am biologically male. I identify as male. As a human I prefer to stay male, and am attracted to females.
I am also likely many people's definition of a furry, though I imagine I don't fit the definition for some others, as I don't participate in activities much of the fandom does. In my fantasies I am a different species entirely, and as that species, I am female and bi. In videogames if there is a bestial race, I'll often play that as a female. In Guild Wars 2, 4 of my characters are female charr. In Phantasy Star Universe my character was a Female beast, in elder scrolls games I often play a female argonian or khajiit. In FF14 if a female hrothgar became an option I would immediately buy a character appearance change and use it to become one. In Warframe I prefer Zephyr, or Ember with the feathered bird skin. In my short stint of overwatch I would play Orisa purely on aesthetics. I have not played as dwarves in Dwarf Fortress since 2008.
Does that make me trans? Maybe? Does that make me bisexual? Maybe? Am I straight? Probably not. Sometimes the labels just don't fit fully, and making up a new word on the spot or going into a complex description may not be called for in casual conversation, so labels even when they don't fully fit can be needed.
EDIT:Verification mostly