It would seem that the knowledge of fusion magic can be dated back to the time of the Shinma War around 4000 BK(?), but, possibly due to its uncommon prerequisites, it died out completely by the time the Slayers stories take place. Its workings were brought into light again by Lina Inverse and her friends, when in the 9th episode they found two artifacts from the aforementioned era containing an amount of black and holy power. Combining the two, they were able to disable Ragudo Mezegis and later used the same technique to defeat Dark Star Dugradigdu.
Fusion magic requires two power sources, those of stability and destruction. These can be spells from the appropriate origin, but it was demonstrated that using raw mazoku and/or shinzoku energy is also possible. When the two powers are brought together, instead of canceling each other out, they fuse into a black and gold field of energy, which, while barely controllable, negates all other magical devices and spells in its vicinity. If channeled into a weapon which can hold spells, such as Galveira, it can also be used offensively - the destructive power of fusion magic presumably depends on the strength of the component spells used, but it might be even as powerful as the Giga Slave.
The energy field generated by fusion magic is greatly similar to the one generated by spells which use the power of the Lord of Nightmares. This is further reaffirmed by Xelloss, who called it the power of creation.