What you do is: from the inventory screen, pick up one potion on your cursor, click the merge button at the bottom, then click on the other potion. If they can be mixed, you'll have the new one. It will have to be identified.
What you can mix depends on alchemy skill alone (level plays no part as far as I can tell). If your skill is low, try mixing light+mod heal to get heavy heal.
It is best to mix one potion at a time for maximum skill gains. And I'm sure someone will be along to leave a link where you can get a list of potions that can be mixed
Nightowl2