While looking at merged mining efforts in crypto-currencies, I stumbled across an interesting site: http://dustcoin.com/mining
The site is interesting, not only because it talks about merged mining, but because it lays out some of the variations between all of the crypto-currencies in relation to Bitcoin.
 Regarding merged mining, I found a good explanation here, at http://dot-bit.org/Merged_Mining:
“Merged mining works like this, you have two totally separate block chains, they are not related in any way nor does either contain any data from the other. When you mine you generate hashes that may be the solution to the current block, this is very very improbable per hash, its like a lottery where everyone generates tickets until someone finds the winning one. Normally you make tickets and check them against the Bitcoin block chain to see if they are the solution. With merged mining you create a ticket and check it against both the Bitcoin block chain and the Namecoin block chain, Bitcoin and Namecoin know nothing about each other, they are two totally different lotteries with different winning numbers, you just sent a copy of your ticket to both. Since you are sending the same ticket to two lotteries you increase your chances of winning one or the other. No Bitcoin data goes into Namecoin no Namecoin data into Bitcoin they remain totally separate, you simply run both the Namecoin and Bitcoin clients on the same machine and submit hashes to both networks, if your hash is the solution to the Namecoin block you get Namecoins if you hash is the solution to the Bitcoin block you get Bitcoins, its exactly like if you where mining on just one network, except you submit the same work twice.” -Credit: ttk2