What is a Merle?
Merle is a pattern or marking, not a color per-say. The merle gene dilutes the base color but leaves splotches unaffected thereby causing the dog to have a patchy, spotted coloration. Mixed over dark colors you get the "Blue Merles" and over the lighter colors you end up with "Red or Chocolate Merles" There are many variations of colorations, but they usually fall within the broad categories of Blue or Chocolate in Chihuahuas.
Breeding Merles can be tricky. When doubled, the gene can cause defects in puppies such as blindness, deafness, dogs that are sterile, or even stillbirth. This happens when a dog with the Merle gene is bred to another dog with the Merle gene. As long as Merles are bred to Non-Merles there is no greater chance of genetical defects than with any other color.