Merchandising is the enhancement of a media purchase through the media seller's supplying of addditional marketing support.
This may take forms as varied as running contests with the advertiser as "sponsor" or using the advertiser's product as prizes in bigger contests, helping to secure trade distribution, sampling programs, salesman's incentives, media logo merchandise (the classic station t-shirt) in-store remotes or just additional free advertising.
Anything extra the medium does for the advertiser in consideration of a purchase is merchandising.
Good merchandising is created in response to specific advertiser needs. What are the marketing goals.
For example if product sampling is a goal, a radio station may have an event every week (WXXX nite at ____Dance club) that could distribute 1000 samples to members of the target.
National Media can do the same thing in a bigger way with mall tours. As a general rule, the smaller players in more competitive situations have the more creative merchandising (I don't have an audience but I can put your Logo on the front of my booth at the Annual County Fair, 100,000 in attendance).
Any radio station's promotion director should have a 3 inch looseleaf binder of the past year's merchandising events. The binder will probably be thicker for stations in markets below the top 50, Spanish Stations, small market newspapers, etc.