Mark-101232 (2/8/2012)
Documented herehttp://msdn.microsoft.com/en-US/library/ms177523(v=sql.90).aspx
In the section "Using UPDATE with the FROM Clause"
John might also like to read the BOL entry below which documents some of the cases where a syntactically correct MERGE will produce incorrect results:
Optimizing MERGE Statement Performance
The Connect item for this sparked a lot of debate at the time. I'm with Erland, for the record. The upvote/down vote counts tell their own story too, of course.
Paul White
SQLPerformance.com
SQLkiwi blog
@SQL_Kiwi