The problem of optimized distributed detection in a system of networked sensors involves a number of design aspects, including balancing probabilities of missed detection and false alarm as well as managing the communication resources through proper in-network information fusion. Moreover, a number of tradeoffs must be exercised, such as the one between the computational requirements for information fusion and sensor control and the communication requirements for information exchange. Therefore, overall system design decisions are best made by jointly considering the impact of design aspects and tradeoffs on the overall system performance. This paper addresses in-network fusion and associated networking algorithms that improve detection performance and energy efficiency for a multistatic sonar application. This is achieved by exchanging and fusing contacts among sonar buoys before transmission out of field. In-network fusion utilizes lower cost buoy-to-buoy communication for the majority of the data communication and enables a reduction in random uncorrelated false alarms by only reporting detections from multiple buoys that present sufficient correlation. The reduction of out-of-field contact transmissions allows a lower signal excess threshold for each buoy, corresponding to an increased probability of detection. We demonstrate the effectiveness of our distributed in-network fusion through both analysis and high fidelity sonar simulations.