How to develop features with Mercurial correctly?

We are two developers and want to use Mercurial in our little project. We both get in touch with Mercurial the first time. We openend a Bitbucket account for our repository. I generated a test project skeleton and pushed it on the repository. My workmate clone from the repository and commited something for testing. Now he want to push that on the repository server.We got something like that:

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I cant merge the two branches, becouse there is no head revision. I only can update the master branch and then we got something like that:

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Is there any way to merge the two branches? What is the best practise to manage somethink like that (eg. develop a feature)? Maybe my workmate need to clone and to open a new named branch?

Solution

Bottom line with mercurial - you always merge locally. In your repository and push back to your parent repository.

Your bitbucket repository is just a container. You keep it as a master repository and do all the work locally.

Also, as @Boas suggested, look at DVCS U and hginit. Both are great for starters (and advanced users) and will sort you well with DVCS.