Merlin the Magician is a fake sorcerer based on the legend of Merlin. Unlike his real world counterpart, this Merlin is very sleazy and uses his nephew, Arthur to try to get enough money to move far away from the run down kingdom they live in.
Merlin is not actually a magician at all, he considers Arthur's requests for corrective eye wear to be witchcraft, and the only magic he can do is throw sparkling dust on the ground which causes an explosion, but Merlin does not disappear, he just simply walks away from the scene.
Merlin appears as his stereotypical "wizard" appearance, with the purple clothes, long hat, and really long white beard. He speaks in an unusual manner, sort of like a con man, and seems to only be interested in money and using his nephew to get money. When Timmy begins to draw the attention of the townspeople as a potential king, Merlin becomes jealous of Timmy's success, and sends his nephew Arthur to slay a dragon in a last ditch attempt to make Arthur king, although Merlin refuses to help his nephew accomplish this task.
Merlin sends his nephew off to fight the Dragon, alone because he cannot help his nephew even if he did have magic, since dragons are impervious to magic. When Arthur finally does defeat the dragon (after Timmy gave him his father's glasses and the sword Excalibur) and becomes the new king of Camelot, Merlin tries to weasel his way back into his nephew's kingdom, but receives a black eye and is thrown off a cliff after Arthur gives a quick glance to Timmy and the latter's glance tells Arthur to just get rid of Merlin. He was last seen alive in human form when he was about to be devoured by the starving townspeople.
He later appears in Cosmo and Wanda's fish bowl in the present time as a goldfish asking them if he could just stay in their fishbowl for a while, meaning he likely did have some form of magic that he used to survive his ordeal, and live for hundreds of years!