It means what it says, the more people the better everything will be.
It is also used sarcastically when an unwanted person is invited or invites himself.
John and Jane want to come too? Why not, the more the merrier!
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Is a phrase employed by men who enjoy the company of other men. It means, literally, the more people who are around the happier the occasion will be. However, scholars extrapolate that people is a stand-in for the word 'men.' Therein the phrase is really means that an occasion is made more entertaining by the increased number of men in attendance. Clearly, the speaker of such a phrase is excited by the additional men who are around or near him.
Wow! Bruce is coming to...the more the merrier. Or, Can you invite the Boston Men's Choir to my party, the more the merrier.
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