What is the best way to merge lines, in sed, awk or perl, that occur between certain strings?
I'm new to sed scripting and I have been working on this for some time now.
I have a large file (sample below) that I need to edit.

>contig...........translated
(sequences)
(sequences)
(sequences)
>contig...........translated
(sequences)
.
.
.

What I need looks something like this.
>contig...........translated
(sequences)(sequences)(sequences)
>contig...........translated
(sequences).............

I'm working with a very large file so simply merging all the lines then adding a new line character before ">contig" and after "translated" won't work, at least not with sed.

It can be done in a very straightforward manner in Perl. I do not understand where the capacity problem comes from - you just write to your output file (sequences) between '>contig...........translated' stripping the former of "\n" ('chomp' function in Perl).

I don't know about best, but one possibility is this awk script,
which streams the input file (only one line or so in memory at any time) quite efficiently, and keeps whatever newline convention you might be using.
The sep=" " in the first line specifies the delimiter that replaces the newlines in merged lines. Use sep="" if you want to merge the lines without any intervening separator.

This awk script is a bit more complex than absolutely necessary, but I only recently found out how to retain the newline convention efficiently, and wanted to apply that

If you need something even more efficient, or want to work with unlimited-length lines (not having to read even a single complete line into RAM), I'd write a small utility in C. I think it'd only take about a hundred lines of code, even if you used unistd.h low-level I/O for maximum efficiency.

Seems I am on the same wave length as Nominal:

If you last line is '>contig...' then the jumppoint ':b' in the above command is obsolete.