"loop:" in Java code. What is this, and why does it compile?

It is not a keyword it is a label.

Usage:

    label1:
    for (; ; ) {
        label2:
        for (; ; ) {
            if (condition1) {
                // break outer loop
                break label1;
            }
            if (condition2) {
                // break inner loop
                break label2;
            }
            if (condition3) {
                // break inner loop
                break;
            }
        }
    }

Documentation.

The question is answered, but as a side note:

I have heard of interview questions a la "Why is this Java code valid?" (stripped the simpler example; here's the meaner one, thx Tim Büthe):

url: http://www.myserver.com/myfile.mp3
downLoad(url);

Would you all know what this code is (apart from awful)?

Solution: two labels, url and http, a comment www.myserver.com/myfile.mp3 and a method call with a parameter that has the same name (url) as the label. Yup, this compiles (if you define the method call and the local variable elsewhere).

As other posters have said, it is a label, not a keyword. Using labels allows you to do things like:

outer: for(;;) {
   inner: for(;;) {
     break outer;
   }
}

This allows for breaking of the outer loop.

Link to documentation.