Please explain source control, because I still don't understand it. I don't understand how a source control system could do merging without knowing about the fo

Please explain source control, because I still don't understand it. I don't understand how a source control system could do merging without knowing about the format of the files. It's currently based on a string merge, but this doesn't seem principled and it's not correct in many cases, or is it? On the other hand it often works in practice.