What is the meaning of Mercutio's repeated curse, "A plague o'both your houses"?

In the first scene of Act 1, Tybalt is determined to fight Romeo for having offended him, and Romeo is just as determined to make peace due to his secret marriage to Juliet. Mercutio, a consistently impulsive character, is disgusted by Romeo's submission, and fights Tybalt. As Romeo tries to intervene, Tybalt stabs Mercutio under his arm. Mercutio states he is "hurt" and then curses them: "A plague o' both your houses."
The use of the word plague is apt - Mercutio is the first of many to be wiped out in the wars of these two houses. Neither will survive intact, and both will suffer throughout the rest of the play. The repetition of the phrase is also indicative of how much Shakespeare wanted us to consider the fate of these two "star-crossed lovers". We must consider the dual references in the word choice. The plague was the most feared disease in England, and there was an outbreak the year before the play was written. Additionally, the plague appears in the Bible as a punishment for the Pharaoh and demonstration of God's power. The tenth and final plague was the death of the firstborn. Romeo and Juliet are only children, and therefore the firstborn of both houses. Mercutio's final action of cursing the two families can be seen as a turning point in the play, and as a demonstration of his understandable anger.

One of the crucial aspects of Mercutio's character is that he is neither a Montague or a Capulet, he is friends with Romeo, who happens to be a Montague. The phrase "Two Houses" recurs throughout the play, (such as in the opening monologue, "Two houses, both alike in dignity") referring to the house of Montague and the house of Capulet. Mercutio is killed as a result of the feud between these two families when he intervenes in Romeo's fight with Tybalt. Mercutio's dying words "A plague o' both your houses!" are partly from anger that he has needlessly been killed in a fight he was never a part of. They are also a kind of foreshadowing of the play's climax, since the deaths of Romeo and Juliet are a double tragedy that afflict both families. Plague in Shakespeare's time could mean both a curse or the literal plague which killed millions.

The day after Romeo and his friends attend the Capulets' party, Tybalt comes looking to challenge Romeo to a fight to repay Romeo for what Tybalt views as his mockery of the Capulet family. Romeo, having just married Juliet in secret, will not fight, and Mercutio fights Tybalt in his stead because he thinks Romeo is behaving dishonorably by refusing to engage Tybalt. When Romeo comes between the two of them, attempting to break up the fight, Tybalt wounds Mercutio under Romeo's arm. Rather than blame himself for getting involved in someone else's business, Mercutio seems to blame Romeo as much as he blames Tybalt. As he lies dying on the ground, he says to the two of them, "A plague o' both your houses." In saying this, he curses both the houses of Capulet, Tybalt's family, as well as the house of Montague, Romeo's family. Mercutio is bitter about his death, which he views as the fault of the feud between the two families, and so he curses them in his final breath.