From Wikipedia:
A merkin is a pubic wig. Merkins were originally worn by prostitutes after shaving their genitalia, and are now used as decorative items, erotic devices, or in films, by both men and women. The female version is usually made of fur, beaver pelts, linen or some soft version of cloth, while the male version is usually made of loops, chains or metal, much more closely related to the codpiece.
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The Oxford Companion to the Body dates the origin of the pubic wig to the 1450s. According to the publication, women would shave their pubic hair for personal hygiene and to combat pubic lice. They would then don a merkin. Also, prostitutes would wear a merkin to cover up signs of disease, such as syphilis. It has also been suggested that when male actors played female parts onstage, they would cover their genitals with a merkin so they could pose as women in nude scenes.