The Merge Down command merges the active layer with the layer just below it in the stack, taking into account the various properties of the active layer, such as its opacity and layer mode. The resulting merged layer will be in Normal mode, and will inherit the opacity of the layer below. If the layer below is not opaque, or if it is in some mode other than Normal, then this command will generally change the appearance of the image.

The most common use of Merge Down is to construct a layer, by starting with a ”base layer” (usually opaque and in Normal mode, so that you can see what you are doing), and adding a ”modification layer” on top of it, with whatever shape, opacity, and layer mode you need. In this case, merging down the modification layer will combine the two layers into one, without changing the way the image looks.