The length of your field should correspond to the length of the answer. In such way, you'll give users more understanding of what answer you’re looking for and help them avoid confusion. Here's some useful info about good form design:
The 10 Commandments of Good Form Design on the Web - Mono
There is a trend in web design to show form labels only when a field is focussed. This can be cool on a simple form like a username/password form, but for anything longer it is probably a bad idea. When you have the space to show labels, do so.