Apparently an assimilated form of Mercy. In Dickens's novel Martin Chuzzlewit (1844), Mr Pecksniff's daughters Charity and Mercy are known as Cherry and Merry. Nowadays the name is usually bestowed because of its association with the adjective denoting a cheerful and jolly temperament (compare Happy). In the accent of Canada and the central and northern United States there is no difference in pronunciation between Merry and Mary.
English: topographic name for someone who lived by a small hill or a man-made mound or barrow, Middle English how (Old Norse haugr), or a habitational name from a place named with this word, such as Howe in Norfolk and North Yorkshire.