Often considered a video game term, merc set can be used in a number of ways. It usually describes when an individual gets flat out owned and or dominated in a social event.
"Ok guys, there is a whole mess of dudes on the other side of this wall... And we're running low on ammo. Any suggestions?"
"I got this. LEEEEERRROOOOOYYYY JEEEENKKKIIINSSS!"
"Dude you freakin merc set those dudes!"