I currently have a Lycanthrope character in my party, and it says he can change shape via the universal monster rule "Change SHape". In the rule it says gear does not meld between human and hybrid form, but does between those forms into animal form. What exactly does that mean?
Shape Change: Change Shape (Su) All lycanthropes have three forms—a humanoid form, an animal form, and a hybrid form. Equipment does not meld with the new form between humanoid and hybrid form, but does between those forms and animal form. A natural lycanthrope can shift to any of its three alternate forms as a move-equivalent action. An afflicted lycanthrope can assume animal or hybrid form as a full-round action by making a DC 15 Constitution check, or humanoid form as a full-round action by making a DC 20 Constitution check. On nights when the full moon is visible, an afflicted lycanthrope gains a +5 morale bonus to Constitution checks made to assume animal or hybrid form, but a –5 penalty to Constitution checks made to assume humanoid form. An afflicted lycanthrope reverts to its humanoid form automatically with the next sunrise, or after 8 hours of rest, whichever comes first. A slain lycanthrope reverts to its humanoid form, although it remains dead.
Sources: http://paizo.com/pathfinderRPG/prd/monsters/lycanthrope.html
Lets take a Human Lycanthrope with Leather Armor.
He has three forms, Human, Hybrid and Animal.
So if he is Human he is wearing the armor, if he changes to Wolfman (Hybrid) he is still wearing the armor. If he changes to a full wolf then all his grear melds away and only returns when he changes form into Human or Wolfman (hybrid) again.