Mentioned by Olo in Episode 11:The Tardy Plunder, these creatures are described a little when he is talking to Fahima Tadhg about the love of his life. Merfolk are top half humanoid lower half fish with scales.
In Episode 18:A Way Down, Olo appears with some Merfolk. The Merfolk appear to be wielding spears. They are swimming alongside and defending what is left of the Tardy Plunder as it is sinking to the bottom of the ocean.