A MailMerge Coversheet is a coversheet that the client can build for himself, making it as customized as he wishes using Microsoft Word. He can use any of the mapping fields to create it and can have as many coversheets as he wishes. Then he can specify during the fax job which coversheet he wishes to use.
BannerFx is created by the Graphics department and can be similar to a coversheet but is used more for creating a form template to fill in values on a sheet. The functionality can be nearly the same as a MailMerge but must be created by the Graphics Department.
Using a MailMerge CoverSheet is much more flexibile.
If you search you can find many examples on this site of MailMerge examples along with a discussion on Mapping Fields.
It is created through a process in Microsoft Word called MailMerge. Where a base document is created and Fields are inserted then merged into the document, hence MailMerge.
Normally, the mailmerge process is used in businesses to take lists of names or contacts and create form letters, merging the names list into the form lettter creating formal letters to each recipient.