dancingfingers gives an excellent overview. It has been 5 years since I've been there, but I went for 3 years on and off. To me it's the best non Planet Bluegrass festival. If I the money and the time I would do both that and Telluride every year.
There is so much music you an't take it all in. Too many stages. Pick a stage, pick a plan, and note that walking from one stage to another you might find two pickers you like playing on stage that wasn't on the schedule. (I swear I saw Doc Watson and John Hartford at one point and the 'stage' they were playing at wasn't even suppose to be there). Some of my favorite sets I've seen have been at Merlefest because almost all them pick one set with a guest or two as well as a set just to themselves.
Note last time I went there was no alcohol sold or permitted and I didn't notice any pot smoking. And the food was nothing to write home about. It's about the music. Get up early, and plan to stay until you get too cold watching the last act on the main stage (one year it snowed). Telluride for good and bad can be about the party, if anything Merlefest could a use a bit more party - but at least you wont get Marshmallows there.
Listening to:
Greensky Bluegrass - Tuesday Letter