Mercerization is a chemical treatment used to enhance the physical properties of certain fabrics.
Invented and patented by mid-19th century English dye chemist John Mercer, mercerization was a quantum leap in textile production, and, more generally, in chemical industry. It manages, in two steps, to strengthen fabric fibers, make them easier to dye, increase their luster, and, to top it off, make them more resistant to mildew. Too good to be true? Well, now I'll give you those two steps: The first is a bath in a lye solution, which attributes to it definite basicity. The second is an acid bath, which neutralizes it. The treatment's effects are immediately observable, and a quick wash afterward makes a freshly mercerized textile safe for human use. Awesome or what?
Mercerization is most often used in the production of cotton clothing. Due to the nature of its visual signature, it isn't usually used on T-shirts, business shirts or jackets, but rather on golfing shirts and casual button-ups. Mercerized cotton tends to be a bit stiffer than standardly treated cotton, so the fabric matches these sorts of attire perfectly. And regardless of the fact that mercerization is a relatively inexpensive process, it is usually used on garments of premium quality.
References:
en.wikipedia.org/wiki/mercerized_cotton
www.britannica.com/eb/article-9052086/mercerization
http://www.answers.com/topic/mercerization