From my understanding it will set the merge element as the higher element in the view hierarchy. Include will simply put the whole viewgroup in there. So using your example the view hierarchy should look like:
With merge:
LinearLayout (root)
|
TextView
With include:
LinearLayout (root)
|
LinearLayout
|
TextView
So you will have an extra LinearLayout in the view hierarchy that you do not need. However, sometimes you need that intermediate view. In your case, you wouldn’t, since both the LinearLayouts have the same layout params and no other differences.