This feature is mostly intended to remove those pesky duplicate "transfer" entries that come up from importing two different bank account ledgers. Usually these transfers are counted twice because both imported ledgers have the same transaction.
The feature could potentially look for transactions that have similar amounts within a week of each other. The transactions need to involve two different (assets/liabilities(?)) accounts. Then, instead of having mvelopes decide which transactions to merge, the user can interactively tell mvelopes which transactions to keep and which to merge.