There's not official documentation for this functionality from the CraftCMS team yet, but here an explanation on how Merge Notifications work from the core developer, Brandon Kelly:
"If you have a draft and update Field A, and someone else publishes an update to Field B before you're finished, the idea is that when you publish your draft, you are only updating the field(s) the draft actually touched (A), which will get merged in with whatever changes were made externally (B).
You can click that yellow button to pull those externally-updated changes into the draft, if you want to see exactly what the entry will look like with external changes merged in. But either way, unless you make your own changes to the same fields in the draft, it won't actually affect the final result."