If you describe God or a person in a position of authority as merciful, you mean that they show kindness and forgiveness to people.
e.g. ...a merciful God...
e.g. We can only hope the court is merciful.
If you describe an event or situation as merciful, you mean that it is a good thing, especially because it stops someone's suffering or discomfort.
e.g. We were told when he was taken to hospital that his injuries were so severe death would be merciful...
e.g. Eventually the session came to a merciful end.