git fetch command downloads changes into a separate branch which can be checked out and merge. During a merge Git will attempt to automatically combine the commits.
When no conflicts exist then the merge will be 'fast-forwarded' and you won't have to do anything. If a conflict does exist then you will retrieve an error and the repository will be in a merging state.
In your environment the changes from a remote repository has been fetched.
You now need to merge the changes from origin/master.
This will result in a merge conflict. The conflict indicates the merge failed because both repositories added the file. We'll resolve this in following next steps.
By keeping commits small and focused you reduce the likelihood of a merge conflict.
git pull is a combination of