If you could have others describe you in one word, what would you want it to be? Most people would not say "merciful," but that's perhaps the quality above all else that God wants us to exhibit, probably because that's the quality He has to exhibit the most, and He wants us to be like Him. So when Jesus says that God "desires mercy, not sacrifice, understand that he was talking about those people who go through the motions of ritualistic religious practice just for the sake of doing so, who thought that godliness was keeping this long set of legalistic rules, and how He would rather us demonstrate His love for others by exercise patience, kindness, and forgiveness with each other.