Scenario 1 - Legitimate Merger Attempt Scenario 2 - Fake Merger Attempt
IMHO a very smart move.
Yahoo and AOL both have communities with repeat usage and significant search market share. Granted indivdually Google has much more search market share but if Yahoo and AOL combined their shares it would create a better rival to Google. A larger search market share would increase the demand from advertisers which should raise the PPC bids which would raise profitability. Personally I think it would also have a better chance of being approved by the Google blog, I mean the government regulators.
This buys the Yahoo board more time to make changes and turn things around. In a perfect world they can turn the company around and be so very profitable that no one can afford to buy them. More realistically they slightly turn things which makes them more valuable and thus demanding of a higher buyout price. Either way it pressures Microsoft to increase their price just to conclude the deal.
Scenario 1 - Legitimate Merger Attempt
Scenario 2 - Fake Merger Attempt