A merchant is someone who buys and sells, as a way of life. Generally a merchant was more likely to go and fetch his stock and bring it to the market, whereas a "trader" was more likely to be the one who received goods at a market, and then sold on to consumers.
Merchants and Recreationists
There is some cross-over in merchants across the recreationist spectrum, although there are many that sell gear only appropriate to certain groups.
Merchants in the SCA
In the Known World, merchants sell medieval or SCA-related items at some events, such as Pennsic or Rowany Festival. Items on sale could be anything, such as garb, filk cds, fabric, wool, armour, trim, leatherwork, drinking horns, tents (period and non-period), weapons (SCA and metal weapons), feasting gear, food, brews...
Merchants (in Australia refered to as traders) in re-enactment are expected to display more historically accurate wares than some others. To sell medjeeval gear (also known as wang in the UK) is considered poor form and such merchants are generally not invited back to markets for subsequent events. Australian events tend to allow traders to set up for no fee so long as their wares are appropriate. Sometimes this allows traders who sell inappropriate materials to get away with it as the event organisers may be too polite to send them away.