Mail Merge is a useful tool that allows you to produce multiple letters, labels, envelopes by linking a main (common) document to a set of data or data source. The main document is linked to the data source by common fields of data, called merge fields.
You can create your own merge fields, specific to your data source, or you can use a predefined set provided by Word. e.g. in a form letter, your main document would be the letter informing the person that they have won money, or their car service time has arrived.