Used properly, it's very powerful.
You want to use it in combination with Representation and/or Pacifism. One gives you an extra +3 science per Specialist (which means +3 science in every city) and the other doubles your GP points. If you're Philosophical or have the Parthenon, that's just as good. Angkor Wat is also nice.
Think about it: free Specialist.
-- In cities with low production, whip or chop a Forge and then run an Engineer (or a Priest if you have Angkor Wat). You'll notice the difference.
-- In your science city/GP farm, run a scientist
-- If your economy is in trouble, run Merchants. +3 gold per city adds up fast.
-- In border cities or new conquests, run an Artist. That'll keep rival culture at bay and encourage fast border pops.
Mercantilism is better than Free Trade as long as the stuff you get from it -- a grab bag of science, cash, and hammers, plus faster Great People -- is better than the extra commerce from Free Trade. This is a judgment call, but one thing to watch is how many other civs are open for trade anyway. Remember, civs that are running Mercantilism won't trade, nor will civs that don't have Open Borders with you, or that are across oceans (before Astronomy).
As a rule of thumb, if only one or two rival civs are open for trade, run Mercantilism. If three or more are open, consider Free Trade.
Waldo