The Ark of the Covenant was covered by the Mercy Seat, so what was the Mercy Seat?
I have heard grace described as something we receive that we do not deserve and certainly didn’t earn (Eph 2:8-9), but mercy is God not giving us what we do deserve, and that’s His wrath. I think that’s fair. I also see that mercy is a spiritual gift. At least that’s Romans 12:8 says as it includes the gift of mercy along with the gifts of serving, teaching, exhortation, giving, and so on (Rom 12:4-8), so mercy is not only an act of compassion, it is a spiritual gift from God. God gifts some with the gift of mercy, and we could surely use that today in the church. People with this gift are more likely to be kind and gentle, are drawn to other sensitive people, and tend to embrace humility, so the gift of mercy equips them to reach out to people who are suffering. That is a God-like attribute too. Just look at Jesus! 
The Mercy Seat
If I were to physically describe the Mercy Seat, it would be as follows: It was a gold lid with two cherubim (angels) beaten out of the ends of it, and these ends covered the Mercy Seat with the space in between being the space into which God would appear. This is the place where God says, “I will meet with you” (Ex 25:22). This gold cover was placed on top of the Ark of the Covenant. The Mercy Seat was connected with the rituals of the Day of Atonement where God did appear, and it was only once a year that the high priest could enter into the Holy of Holies. The Mercy Seat also appears in later Jewish sources, and even twice in the New Testament, but in the New Testament, the Mercy Seat’s meaning is brought to clarity and its meaning has great significance. The author of Hebrews says that “even the first covenant had regulations for worship and an earthly place of holiness” (Heb 9:1), and if these regulations or rules were broken, the priest could die on the spot, and some did! We cannot go rushing into the presence of God as we are, and neither could the high priests. In our state, no man can see God and live (Gen 3:8-10; Ex 33:17-33). That’s why we need God’s mercy, but grace comes first.
The Earthly Temple
In the earthly temple, there was a place called the Holy Place. Behind the second curtain was a second section called the Most Holy Place” (Heb 9:2-3). Behind this second curtain was “the ark of the covenant covered on all sides with gold, in which was a golden urn holding the manna, and Aaron’s staff that budded, and the tablets of the covenant” (Heb 9:4), and “Above it were the cherubim of glory overshadowing the mercy seat. Of these things we cannot now speak in detail” (Heb 9:5). It wasn’t until much later that the symbolism was seen as a foreshadowing of the work of Jesus Christ. For example, it was “when Christ appeared as a high priest of the good things that have come, then through the greater and more perfect tent (not made with hands, that is, not of this creation) he entered once for all into the holy places, not by means of the blood of goats and calves but by means of his own blood, thus securing an eternal redemption” (Heb 9:11-12). The supremacy of Christ is that He is infinitely perfect and holy in every way, so there is no need for further sacrifices. It was once and for all. It was the most perfect sacrifice possible, so “just as it is appointed for man to die once, and after that comes judgment. Christ, having been offered once to bear the sins of many, will appear a second time, not to deal with sin but to save those who are eagerly waiting for him” (Heb 9:27-28).
God has Mercy
God spoke through Moses and this is who Paul quotes (Ex 33:19) in Romans 9:15, writing, “I will have mercy on whom I have mercy, and I will have compassion on whom I have compassion.” Today, God meets with us (Ex 25:22) through Christ (John 6:44). His mercy’s been revealed through the atoning work at Calvary for all who trust in His Son. Since we “all have sinned and fall short of the glory of God” (Rom 3:23), we must be “justified by his grace as a gift, through the redemption that is in Christ Jesus” (Rom 3:24). There is absolutely no other way (Acts 4:12). Otherwise, the wrath of God still abides on them (John 3:36b), however, for those who believe, they can thank God because it was through Jesus Christ that “God put forward as a propitiation by his blood, to be received by faith. This was to show God’s righteousness, because in his divine forbearance he had passed over former sins” (Rom3:25). This makes more sense of the original Passover where God would pass over all who had the lamb’s blood on the doors and lintels. God’s wrath was satisfied through the “propitiation by his blood,” or Jesus’ blood (Rom 3:24). The word “propitiation” simply means having the satisfaction or that Jesus Christ was the acceptable, wrath-satisfying sacrifice on our behalf for our sins. Jesus reconciled us back to God. Now we can have fellowship with the Father, and a relationship as His own child, but only through Christ can God meet us (Ex 25:22). This is the supreme act of love in history (John 3:16), and it “was to show his righteousness at the present time, so that he might be just and the justifier of the one who has faith in Jesus” (Rom 3:26).
We can and should thank God for His tender mercies revealed through the sacrificial atonement that was provided by Christ. We were redeemed “with the precious blood of Christ, like that of a lamb without blemish or spot” (1 Pet 1:19), so of the saints, we can say that they have overcome “by the blood of the Lamb and by the word of their testimony, for they loved not their lives even unto death” (Rev 12:11). God’s mercy is certainly not what we deserve, but God doesn’t give us what we deserve, rather, He gives us what we need (John 3:16, 17:3).
Here is some related reading for you: What Does Atonement Mean.? Bible Definition of Atonement 
Resource – Scripture quotations are from The Holy Bible, English Standard Version® (ESV®), Crossway Bibles. (2007). ESV: Study Bible: English standard version. Wheaton, Ill: Crossway Bibles. Used by permission. All rights reserved.