Darcs handles binaries, but not particularly well (ie, nothing quite next to the ease and brilliance of working with text documents). Binary merging is not well defined in general by any means, so binary is handled essentially at the entire file level. Because darcs patches need to [1] store the previous file state as well as the new/current one, patches in darcs with binary changes can get huge quickly.

Optimizations have been added to darcs over the years including some changes to something increasingly akin to git's hash storage for binary objects, but so far as I know, binary files that might change a lot over time are still mostly discouraged in darcs.

[1] To keep the patches reversible, for commutation.