Why are wheels labeled "R16" when the 16" is actually the diameter?

Tires (or tyres) are marked as www/hhRdd where www is the tread width in mm, hh is the sidewall height as a percentage of width and dd is the inner diameter in inches. I.e. 245/75R16 has a width of 24.5cm, 75% (~18cm) height and 16in (~40cm) diameter. The R indicates the construction of the tire is 'radial' ply. 'Bias ply' tires, which were common before radials became the standard are indicated with a blank space. Other tire constructions exist, but are rarely used on highway vehicles.

Points to anyone who can give a good reason for mixing three different systems of measurement in a single size.

"The code also usually has a prefix indicating whether it for a car, truck, etc - also there seems to often be lots of non-standard suffixes for manufacturer date, load & speed ratings etc" -Wilf

Great point. Much more information about tyre sizes can be found here: http://www.tirebuyer.com/education/understanding-tire-sizes-and-types