It's a small city of about 25,000 people that covers the entire island, hence the name. Living on Mercer Island as a teenager, I knew it was the posh part of town, but to me it was just home. It's still in the top 100 richest ZIP codes in the United States, but other parts of Seattle's Eastside have also entered those ranks.
There are excellent schools on Mercer Island, as is common in affluent communities, but the island is also home to Washington State's only coed Jewish high school. The restaurants are nice, and there are some lovely parks, but if you really want to go clubbing or hit theater or major sporting events, you drive to Seattle for that.
Mercer Island has a great celebration and fireworks display for Independence Day, as well as being a focal point of the Blue Angels' performance for Seafair every year in August. Sometimes they even close the bridges temporarily so drivers are not distracted by the Blue Angels practicing or performing.