For about five minutes I could not figure out how to use it, because frankly the interface and docs suck. So for the benefit of web searchers everywhere, here is the basics.

When it opens you will see a dialog like this:

The highlighted sections show diffs, the arrows point to the version the tool will use when it saves. To change this setting click on the arrow and select how to handle it:

The arrow will update. The result is still a little vague for me at this point, which is why I am glad I discovered the magical third pane. If you click the little divet:

And drag it up, you will get to see a preview of the actual merge:

Neat.