Official comment
This setting designates whether the existing ONTRAPORT data or the new imported data takes precedence
Merge and overwrite means your imported data takes precedence over your existing ONTRAPORT database information wherever it finds conflicts.
For example, if ONTRAPORT finds an email match, but the phone numbers for that record DON’T match, it will use the new, imported phone number and OVERWRITE the one that exists in your database.
Merge and underwrite with old record data does the opposite. Existing ONTRAPORT data takes precendence over the file you’re importing.
Note: Contact Tags are an exception, and are always added to the existing Contact record. All Contact Tags in your import CSV file will be added to the existing contact record.
Refer to our Knowledge Base section on Contact management.