Once Beyond Compare has completed the comparison it will show up to four panes: The left, center, and right panes at the top, with an output pane below it. If you include a center file Beyond Compare will be able to compare both files to it and mark changes as additions, modifications, or deletions on each specific side. Changes on the left are marked in teal and changes on the right are marked in magenta. Overlapping changes are considered conflicts and are marked in red. (You can change the color scheme if you like.)
Conflicts
Any time there are different changes in the left and right side that are on the same lines or within two lines of each other those sections will be considered a conflict and will be colored red in the three input panes. The output will be considered a conflict. If the same change is made in both the left and right side it isn't considered a conflict.
Display Filters
When merging, the display filters switch from Beyond Compare's traditional ones to new ones that check the merging status of each line. Using those filters you can limit the display to just conflicts or just changes on one side or the other.
Merging
You can navigate from difference to difference in both the input and output panes and the windows will stay synced up. When you are positioned on a difference you can use the Take Left 
, Take Center 
, and Take Right 
commands to accept the changes from the left or right or keep the original from the center. The "Take" commands are available on the toolbar, in each edit's popup menu, and as buttons next to each section in the output pane. When it first loads, the output pane will match the center except when it can automatically take non-conflicting changes. Each change will be colored to match the pane it originally came from. While merging you can also edit the output pane directly, which will change the section to yellow. If you want to revert to one of the original inputs just use the "Take" command again.