SharePoint Online with Azure RMS

To classify a large amount of files, you could write a script, for which you will require https://docs.microsoft.com/en-us/information-protection/deploy-use/install-powershell. In a computer where you have AIP client installed and configured, the PowerShell commands are automatically available for you to carry out automation using custom scripts. For example, you can use cmdlet (ref this https://docs.microsoft.com/en-us/powershell/module/azureinformationprotection/set-aipfileclassification?view=azureipps)

Set-​AI​PFile​Classification

To automatically set an Azure Information Protection label on one or more file(s), according to conditions that are configured in the policy.

One thing to keep in mind, is that Microsoft's approach to Azure IP, is based on the premise that the person working on file understands the content and is therefore able to make the best judgement about the label that should be assigned. The approach also presume that the IT organization  is best suited to determine what type of protection should be assigned to the various labels. By splitting the responsiblities like this, organization get much more control than they get with the all or nothing approach provide by IRM in SP. 

It's a term, basically means "allowing the applications to work with the data". Which is not possible if you encrypt the files outside of SharePoint and upload them to a library.