NCsoft's Aion probably weighs in as the highest profile server merge over the last little while. That said, it hasn't been the only one, as SOE's Vanguard also slimmed down, and scuttlebutt says that EverQuest II's recent free-to-play announcement will eventually lead to a consolidation of the game's subscription shards.
While the pros of merging servers are obvious (keeping the game afloat, swelling the population, and helping group content), there are also some decidedly negative effects. In a PvP-centric game like Aion, it becomes more difficult to quest, particularly in the Abyss where there are now a lot more daevas rubbing shoulders in what is ultimately a rather small zone. In Vanguard, players may have gained questing partners, but they also lost prime housing spots and, in some cases, communities forged over years of gameplay.
Do you think server merges are worth the cost? More importantly, do merges (or even merge announcements) signal the impending decline of a game and cause you to begin looking elsewhere?