To play through the entire game co-op, you have to complete the area and bosses both on your game and your friend’s game. Nothing you do there will affect your world in any way. Anything you do in a hosts world will only be for their game. If your goal is to play with friends, you’ll basically have to play the game through twice. Phantoms that die will return to their own worlds, but the host will remain in his as long as he survives. If the host dies, every phantom will be returned home. The phantoms’ job is to protect the host at all costs, even at the expense of their own life.
This merchant is located near the first bonfire of the Undead Burg. To obtain a Dried Finger in the Remastered edition, you can buy it from the Undead Merchant in the Undead Burg. The Remaster allows you to summon 3 phantoms and 2 invaders using an item called a Dried Finger. In the original game, a host is able to summon 2 phantoms and be invaded by one invader. This is the developer’s way of balancing the game and ensuring it doesn’t turn into ultra-easy mode. The host won’t receive any penalties, but the phantom will immediately lose half of their Estus flasks (an uneven number of flasks will round down).
The joining player is referred to as a phantom, and their character will have a white, ghost-like appearance. In order to do any sort of co-op, you need one player to host and another to join.