This has been tested on CentOS 5.x (and assumes you have root privileges).
First, install a couple of dependencies: a C compiler and the necessary Python C headers $ yum install gcc $ yum install python-devel
Then Docutils for Python is needed for generating the documentation. There is no Yum package for that so do this:
$ wget http://docutils.sourceforge.net/docutils-snapshot.tgz
$ tar -xvf docutils-snapshot.tgz
$ cd docutils
$ python setup.py install
Then we are ready to install Mercurial (1.8 was the latest version at the time of writing)
$ wget http://mercurial.selenic.com/release/mercurial-1.8.tar.gz
$ tar xvzf mercurial-1.8.tar.gz
$ cd mercurial-1.8
$ make install
And that’s it. You can sanity check the installation by running:
$ hg debuginstall
Read the official Unix Mercurial Installation Guide