Merge You merge data when all of the data sources that you want to merge into a single data source have exactly the same set of fields. For example, if you are linking the Products tables from several different databases, and if each table has exactly the same fields as all of the other tables, then you merge the data. In effect, you create a single longer table out of several shorter tables. Merging data is particularly useful if you want to sort, group, or filter multiple similar data sources in a single Data View.
Join You join data when two separate data sources have one field in common. For example, if you are linking a Products table with a Categories table, and the tables are linked by a field called CategoryID, then you join the data. Joining data is particularly useful if you want to present related data sources in a single Data View.
URL: http://office.microsoft.com/en-us/sharepoint-designer-help/add-a-linked-data-source-HA010355748.aspx
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