Binaries are not merged - if histories diverge and one side changes but the other does not, it will choose the side that changes. If both sides change, it will record a conflict and you have to choose one side (or create a new binary that you tell the system is resolved). You can run an external merge tool with 'git mergetool' and there are over a dozen it knows how to run, but I don't know which of them will handle images. You can also use .gitattributes to help you diff binary files efficiently, but you still have to either choose one side or manually create a new binary. I mean, even a merge tool won't help much there - if you have images that changed on two different branches and you want to combine them, you have to fire up Photoshop or something anyways - that's almost always going to be a manual process. Though, in the four or so years I've been using Git (and the years before that with SVN and CVS and RCS) I don't remember having to do that very often - thus is the life of a coder, I suppose. The people who create and modify images for programs tend not to tread on each other.

Also, this is really the same problem even for systems without solid branching capability, like SVN. If two people modify a binary image at the same time and one commits, then the other will get a merge conflict when they update and will have to solve the conflict in order to commit.