A little bit confusing to get started, but in the end quite simple. To get started, the easiest is to put the kdiff3 folder in your path.

Assume you're on branch 'master' and want to merge changes from 'master' to 'working'

C:\Projects\GitTest>git checkout working
C:\Projects\GitTest>git merge master
Auto-merged blabla.txt
CONFLICT (content): Merge conflict in blabla.txt
Automatic merge failed; fix conflicts and then commit the result.

To fix the conflicts using kdiff3, first you need to tweak the kdiff3 configuration a bit: start kdiff3, and go to Settings, Configure KDiff3, Integration. Under 'Command line options to ignore', add ';--'. To resolve conflicts, you can now use:

git mergetool -t kdiff3

To permanently configure kdiff3 as the merge tool (so you don't need to specify the '-t kdiff3' anymore):

git config merge.tool kdiff3