How to merge Javascript and CSS?

We would not recommend merging Javascript and CSS files. See why here: http://fishpig.co.uk/blog/why-you-shouldnt-merge-javascript-in-magento.html

If you wish to merge your all css (or javascript) files in Magento you can do that in your Magento Admin Panel:

1. Log in your Magento admin panel then go to System > Configuration.
2. From the Current Configuration Scope: Select your Store view then click on Developer tab.
3. Now click on Css Settings (or Javascript Settings) Tab.
4. From the Merge CSS Files Select yes to merge your css. Default No is selected.
5. Now clear your browser cache and also refresh your Magento cache. Your all css files are merged now.