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Merlin comes to The Faerie Queene already with a reputation as the magical dude who's pretty instrumental in the rise of the great King Arthur of England. And while Merlin's rep is important to Spenser, he doesn't let it completely dictate his representation of Merlin, who plays a much less central role in The Faerie Queene than he does in most tales about King Arthur.
Instead, Spenser emphasizes Merlin's status as a prophet and a creator, since he can both read Britomart's future and constructs a pretty nifty mirror for Britomart's father in which can "shew in perfect sight,/ what ever thing was in the world contained" (III.ii.19). So yeah, not your average mirror.
Because the mirror Merlin constructs is a perfect representation of the world, Merlin is a figure for the artist in the poem, since artists also aim to represent "ever thing in the world contained." Since art in general is rather tricky subject in The Faerie Queene, it's important that Merlin's mirror is presented as a good thing, a clue that this guy is doing the whole art thing right.