God’s mercy is that our sins are absolved from our souls, so to speak. However, damage remains, and this damage must be repaired.
The damage is to ourselves, such as fostering attachment to sin, and generally, such as tempting others to sin or a loss incurred by one’s sin.
The spiritual damage caused by sin is repaired through prayer, fasting, and almsgiving, and potentially but not necessarily through other ways, such as direct restitution for what we have stolen.