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This guy is like a cross between Obi Wan Kenobi and the crazy Doc from Back to the Future. He's super-wise, but he's pretty batty because he's confused by his own life's timeline. Merlyn literally lives backwards through time:
"I was unfortunately born at the wrong end of time, and I have to live backwards from in front, while surrounded by a lot of people living forwards from behind." (S.3.69)
This screwy chronology accounts both for Merlyn's ability to (kind of) predict the future and his constant befuddlement.
He initially comes across as a very stereotypically wizard-like guy. He even wears a gown with stars and moons on it and a pointy wizard hat. His sidekick is Archimedes, a wise owl that can talk, and sometimes the owl lives under his hat (creating the unfortunate side effect that Merlyn is sometimes covered with bird poo).
Merlyn's also otherworldly: it is said that his father was a demon, and that he's an Old One (a sort of fairy). He's also compared to animals like foxes (Q.2.78) and vultures (Q.2.40), which symbolize his cleverness, slyness, and resourcefulness. This makes sense, since Merlyn's go-to form of education with young Wart is turning him into various animals.
The most important role Merlyn plays in the novels is that of Arthur's tutor, and then mentor. Merlyn is a pacifist (so, suspiciously like T.H. White himself): he is "an opponent of blood-sports on principle—although he had gone through most of them during his thoughtless youth" (Q.3.3). Not surprisingly, perhaps, he's also a vegetarian. Because he's a peacenik, Merlyn's most valuable intellectual gift to Arthur is the series of lessons he teaches him about the use of force and its relationship to justice. Meaning, usually when Might is exercised there is no real justice.
He maintains that there is almost no situation in which attacking someone is okay—except maybe when someone else attacks you first (but even then, it's dodgy). Merlyn shows an expedient streak, though, when he teaches Arthur some underhanded and unconventional battle tactics (like attacking at night and going after knights instead of unarmored peasants).
But he walks the walk. When he fights in Arthur's final battle against King Lot, he does so as a common foot soldier. No armor for him.
Although Merlyn has foresight (since he's already lived through it all), he is frequently confuzzled, and doesn't always give Arthur important information in a timely manner. For example, he forgets to tell him who his mother is, so Arthur accidentally sleeps with Queen Morgause.
There's also the implication that Merlyn is really looking forward to meeting up with Nimue (a hot enchantress who sends him into a 700-year coma) so he kind of blows this off. By the time he realizes what he's forgotten, it's too late.