Merging catalog labels means that two or more catalog labels are joined together into one single catalog label. You will normally merge catalog labels when you have different existing labels which in the end turn out to cover the same meaning. In that case you will merge these catalog labels together.
Relocating catalog labels is simple. Each label has a selection box in front of it. Tick each catalog label that you want to merge to another label (don't select the target label).
Then click the Multi Tools button and select "Merge Selected Labels with another Catalog Label" and then select the target label.
Finally confirm the merge.
Notice that the selected labels are now merged with the target label. If there were assigned images to the labels that have been merged to the target label then the assignments are now all changed to the target label.