United and Continental Airlines announced today they were teaming up but not officially merging. Once regulatory permission is granted, the two airlines will begin to codeshare each others flights and coordinate connecting flights. Eventually, Continental would join UAL's Star Alliance.
Here is part of an email I received today from United~~~
Internationally, Continental and United will establish joint ventures that will allow us to cooperate with each other and with other Star Alliance airlines throughout the world. These joint ventures will enable us to provide you with highly competitive flight schedules, fares and service to more destinations than we do today.
In short, once regulatory approval is obtained, this new partnership between United and Continental will expand your choice of flights and destinations, and improve your ability to earn both miles and elite status in Mileage Plus. Together we will offer you more value whenever you fly. We expect to bring you the benefits of our cooperation starting some time in 2009, and until then, we will keep you informed about our progress.
Makes sense, they compliment each other. United is stronger in Asia and Continental in Latin America and Europe (they fly to a lot of smaller European cities from the US).