Okay. Lets start with the basics...
When I think of Merlin, I think of several things.
Let me introduce you to Myrddin Wyllt (a.k.a. Myriddin the Wild / of the Woods / of Carmarthen). Now rumour has it, that Myriddin was driven mad by witnessing the horrors of war and he fled to the woods and became a bit of a wild-man. Monmouth had a very reliable source - here we go - he claimed to have the actual words of this mysterious hermit. Which he then tuned into a great work, which he aptly named Prophetiae Merlini (The Prophesy of Merlin).
Before we continue, we need to take a look quickly at Nennius works. Now Nennius famously listed Arthur's 12 battles, although he never mentioned that Arthur was a king. Who he did talk about was Aurelius Ambrosius...
....The British Warlord, Vortigern, was trying to erect a tower ( like you do), but the tower, for some unknown reason, always collapsed before completion. The solution was simple - all that was needed was the blood of a child born without a father - so simple, why did no one else think of that?! This meant they had to travel to a galaxy far far away, meet up with the Jedi -- hang on -- sorry -- wrong story....
...Luckily, for Vortigern and the tower, there was such a child. A boy called Ambrosius. He was brought before the king. He bravely told the king that the reason why the tower kept falling down was because the foundations were built on a lake where two dragons continuously fought each other. Obviously this was a not so subtle metaphor for the Saxon's and the Britons who were continuously fighting for dominance. The tower would not stand while Vortigern had the throne. It would only stand when Ambosius became king. Ambrosius then has the cheek to tell Vortigern to go away. Ambrosius says "I will stay here." I bet Vortigern didn't see that one coming.
But what has this got to do with Merlin?
Monmouth changed the story Nennius told -- such things happen now and then. The fatherless child is actually a prophetic bard, who goes by the name of Merlin.
Monmouth magically weaves Merlin into the stories of Arthur and his knights. And he states that it was Merlin that brought the stones for Stonehenge from the Preseil Hills. Stonehenge - according to Monmouth- is the burial place of Aurelius Ambrosius.
It was a good job Merlin knew a giant to help him build Stonehenge - I do not understand why archaeologists have never found any evidence for the giant race helping with Stonehenge - I mean, it makes sense and how hard can it be to find a giant's footprint?! I do not think they are looking hard enough.
This depiction of Merlin and the giant can be found in the manuscript of Roman de Brut by Wace.
Monmouth is also responsible for the tale of how Arthur was conceived. If you are not familiar with it, you can read about it here. But to quickly recap... Merlin casts a magic spell on Uther Pendragon, changing his appearance so that he looks like Gorlois, Duke of Cornwall. Uther creeps into the bedchamber of Gorlois's wife, Igrain, and begets her with child.
Monmouth caught, what I like to call, the King Arthur bug - I must warn you it is very contagious - He could not leave Merlin's story alone, just like he could not leave Arthur's. Merlin pops up again in Vita Merlini.