When you configure an MPLS shim interface over an ATM, Frame Relay, or HDLC layer 2 interface, no other interface (for example, PPP or IP) can be stacked above the layer 2 interface.
By contrast, when you configure an MPLS shim interface over any Ethernet or Ethernet/VLAN interface, both the MPLS shim interface and other interfaces (such as IP, PPP, or PPPoE) can be stacked above the layer 2 interface.
When you configure both an MPLS shim interface and another interface over a layer 2 interface, traffic for a protocol explicitly configured in the interface stack is forwarded to that protocol layer for further processing. Traffic for any nonconfigured protocols is forwarded to the MPLS shim interface on the other side of the connection.
When the MPLS shim interface is the only layer stacked above the layer 2 interface, as is the case with ATM, Frame Relay, and HDLC, then all traffic is forwarded to the MPLS shim interface and across the MPLS tunnel.