MERLE COAT PATTERN EXPLAINED
Merle is a dilution gene, that is, it lightens whatever the coat color would otherwise have been. The lightening is not spread evenly over the coat, but leaves patches of undiluted color scattered over the dog's body. Also, the lightening seems to work primarily on the black pigment in the coat. Note that "black" as used here includes liver or chocolate. Merle is a distinguishing marking of several breeds. The merle gene also plays a part in producing harlequin. The most recognizable is the blue or red merle, but chocolate merle is also possible (see photos below).
Chocolate Merle Blue Merle
Merle refers to the pattern in the coat and is not a color as such. The white and gray patterns that appear on a black make them appear to have a blueish cast. These are called blue merles. Merle is a color combination in dogs' coats. It is a solid base color (usually red/brown or black) with lighter blue/gray or reddish patches, which gives a mottled or uneven speckled effect. Although most breeds that can have merle coats also typically have white markings (such as around the neck, under the belly, and so on), and often tan points (typically between the white and the darker parts of the coat), these are separate colors from the merle; some dogs do appear completely merled with no white or tan markings. Merle can also alter other colors and patterns besides the usual red or black. These combinations such as Brindle Merle or Liver Merle.
In addition to altering base coat color, merle also modifies eye color and coloring on the nose and paw pads. The merle gene modifies the dark pigment in the eyes, occasionally changing dark eyes to blue, or part of the eye to be colored blue. Since merle causes random modifications, however, both dark-eyed, blue-eyed, and odd-colored eyes are possible. Color on paw pads and nose may be mottled pink and black (see photo).
Mottled paw pads on chocolate merle pup
Merle is actually a heterozygote of an incompletely dominant gene. If two such dogs are mated, on the average one quarter of the puppies will be "double merles". A phantom merle is one with such small patches of merle—or none at all—that it appears to be a non-merle. In America, a dog with the phantom merle coloring is described as being "cryptic for merle."
This document is research in progress and through experience in breeding merles. Most of the information was obtained from the world wide web.