In Microsoft HTML Help CHM files you can create genuine modular projects with separate help files that are displayed in a single TOC. This is called "runtime merging". Alternatively, you can also combine all your modules to one large help file, just like the output from a single project. This is called "publish-time merging".
Choosing the merge method is only relevant for HTML Help. All other output formats use publish-time merging only, merging all the modules in your project to create output that is exactly the same as output generated from a single project.
See Runtime and publish time merging in the Reference section for full details of the capabilities of these two different output methods for modular projects in HTML Help.
In modular HTML Help (CHM) projects in which the child projects are merged in runtime mode, the master project must contain at least one topic and the default topic must be set in the master project. If you don't do this you will get an error opening the main CHM and the indexes of the child CHMs won't be available. (This is caused by uncorrected bugs in the Microsoft HTML Help system.)
Modular Projects (Reference)