Here we have a code conflict and rather than showing you what the file looks like on the two sides it shows you what was changed on both sides relative to the GCA. So we get two unified diffs. The local side made this edit, while on the remote side we had that edit. Then it is obvious how to resolve the conflict without losing a change.
This works for the cris-cross case because that GCA is really a set of common revisions merged together.
Git has something similar if you turn on the "diff3" conflict style, and I can't for the life of me understand why it's not on by default, because there are many situations where you just don't have enough information to properly resolve a merge without it.
zdiff3 is NOT "better", it's a matter of personal preference. it moves common lines out of the conflicted hunks, which may be highly confusing. some people use it anyway
If you ask on / search the history of the mailing list, you'll see that in complex merges with synthetic intermediate parents it can produce some really gnarly output, which is the main reason why (coupled with git's general conservatism).
This works for the cris-cross case because that GCA is really a set of common revisions merged together.