Also, if you've found this page, and are interested, but not sure how to use the new three-way merge tool, the following link goes into great detail as far as how to actually use the merge tool.

Finally Released: 3-Column Merge Editor in VS Code! | by Volodymyr Golosay | JavaScript in Plain English

[Note that the article author is using Git, but using the merge tool is exactly the same as with Hg]