I desire mercy, not sacrifice: Jesus applies this desire of God to eating with sinners. Jesus showed mercy by eating with them. This contrasted with the Pharisees who avoided sinners. They considered their avoidance to symbolize sacrifices.
Jesus exposed the Pharisees' true spiritual state. The Pharisees considered themselves to be righteous. But they were actually unrighteous and needed the Messiah to save them (Matthew 7:1–5; 8:11–12; 19:30; 20:16; 21:43).