Schumacher is reported to be earning seven million euros (£6.2m) - a relatively modest salary compared to the sport's highest earners, such as Fernando Alonso and Lewis Hamilton, who reports suggest could be earning two to three times as much.
Last season he came close to a sensational mid-season comeback when he was asked to fill-in for the injured Felipe Massa at Ferrari.
However, those plans were scuppered by a neck injury that he had picked up in a motorcycle crash earlier in the year. He says that injury is no longer a problem.
He said: "Before giving the final okay, I had to make sure my neck was okay. It wasn't okay in the summer, but it's had the time to heal completely."
During his previous 16 seasons in the sport, Schumacher contested 249 grands prix, breaking virtually every record in the sport. He has won the most world titles (seven); most race victories (91); most pole positions (68); highest number of wins in one season (13 in 2004); number of consecutive podiums (19); wins from pole (40); fastest laps (76); hat-trick of pole, win, fastest lap (22), and most number of consecutive results in the points (24).
Asked if he was worried about putting his reputation on the line by returning, Schumacher replied: "I hope they will judge me on what I've done before.
"Brawn is a team that won both championships last year, they now have a strong partner in Mercedes, so the only aim is to go for the championship."
Schumacher revealed that he had consulted wife Corinna on his comeback.
"I had to sort out my personal situation before entering this new one," he said. "She could see the spark in my eyes, and so she didn't really argue."
Schumacher's move to Mercedes GP marks a reunion between himself and the German car maker that helped push him into F1.
He raced for Mercedes-Benz as part of its junior driver programme, competing in world sportscar events during 1990 and 1991.
Schumacher's decision means that Mercedes GP will field an all-German driver line-up in 2010, having already confirmed several weeks ago that Nico Rosberg will race for it.
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