How to use Merge Layers and what are the differences in the settings:

The main use of the Merge layer feature is to combine multiple layers into a single layer. This simple process has some nuances that we explain in the following article about the available options.

The first available checkbox is Make New layer editable.
NOTE: Editable means that you can not modify any of the content of the current layer motions but you can draw on that layer.

This feature defines whether or not you are able to edit the new merged layer, for example moving/resizing the lines of the drawing. It also defines if you can keep the layers animated (layer motions).
This option is unchecked by default, preserving all the layers’s motions and preventing you from editing the new layer.
If you make the new layer editable, the animation (layer motions) are removed and the layers merge to the positions they had at the beginning of the panel or at the current frame in the Timeline workspace.

Even if you do not make the layer editable to start with, it is always possible to make it editable afterwards by selecting the content of the layer and right clicking to Convert Template to Drawing. This gives the same result as if you had made the layer editable in the first place.

Another way to think about it is that when the new layer is editable it is a single image. When it's not editable it keeps the merged layers as untouchable movie clips.

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