It links a .DLG file to a specific .ITM file to enable it to be conversable. Such as Lilarcor.
In BG2 ToB we have:

2DA V1.0
*
              LABEL  FILE               
SW2H14        5689   SW2H14

The first column is the Item reference (the above example is Lilarcor obviously).

LABEL column is a reference to the Dialog.Tlk, this will be shown in the item description. 5689 is commonly used for writing "Conversable" on the button.

FILE is a reference to the name of the DLG file that is started when you click on the Item's Conversable Button.