Madam Merlar is Merlon's deceased ancestor in the game Paper Mario. She exists as a spirit in a hidden room in Shiver Mountain. The wall to her room is just an illusion; Mario can walk right through it. Madam Merlar is a messenger of the Stars and she knows the secret of the Crystal Palace. Her role is to help Mario reach the entrance of the palace by giving him the Star Stone. Merlar shares the Merlon clan's "ability" to tell long-winded, drawn-out stories that can put Mario into a lengthy sleep.
After the stairs to Crystal Palace arise, Madam Merlar's room will be blocked off for the remainder of the game. That is because the staircase that the Star Stone made blocks her chamber. However, Merlar is present in Paper Mario's ending parade, where she performs magical effects alongside her relatives.
Madam Merlar's name would appear to be a portmanteau of "Merlon" (or perhaps "Merlin") and "Star," though it may just be a simple derivative of "Merlon."
Madam Merlar is one of the two ancestors of Merlon who is a spirit, the other being Merlumina, who is very similar to her.
In addition, both share the same name in Japan: Kurisutāru.