What does "atoned" mean in "Yet he, being compassionate, atoned for their iniquity". Psalm 78:38?

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Psalm 78:38

"Yet he, being compassionate, atoned for their iniquity and did not destroy them; he restrained his anger often and did not stir up all his wrath." ESV. My emphasis.

Being compassionate was the reason for God’s atoning, but is compassion by itself sufficient?

Romans 6:23

"For the wages of sin is death".

Atonement involved the death of an animal in Leviticus 5:16

"And the priest shall make atonement for him with the ram of the guilt offering".

Is death a component of this atoning in Psalm 78:38? If death is a component of this atoning whose death was involved?

What is the meaning of "atoned" in Psalm 78:38?