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As the video below shows, AddMerch essentially links website images to a store where visitors can add that image to t-shirts, aprons, mousepads and the like. As a seller, you set a base price for each item (with Printfection's profit included), and add whatever commission you want on top of that.
You can see AddMerch in action on Tumblr at the Punchlinez Tumblelog and integration instructions for Tumblr are found here.