The Fusion Shrine is used to increase the rarity of heroes. This is done by fusing certain heroes together, which will then create a new higher tier hero.
The main hero being fused will retain their level, gear and runes. They will also remain in the Arena Defense Lineup, if they are in it.
The heroes used as fodder will refund any resources used on them, and any equipment. They will be removed from the Arena Defense Lineup as well.