על שלושה דברים העולם עומד
ועל גמילות חסדים
On three things the world stands:
On Torah, on worship and on kind acts.
Shimon ha-Tzadik (the “Saint” or “Righteous Person”) said that the world stands on three things: On Torah, on worship (literally “Avodah” — the sacrificial service in the Temple; but the later implication is ‘worship’ in general) and on ‘gemilut hasadim’ — kind acts. 
“Such [kind] acts include giving charity to the poor; attending the sick, the abandoned and the orphaned; arranging and attending funerals for the dead; comforting the bereaved, and helping one’s neighbors in time of need.”  In this case, the implied definition of “kind acts” is helping those who can’t help themselves, and from whom you can’t reasonably expect anything in return. “Kind acts” are unselfish acts.
The same source gives yet another example or definition of “kind acts.” Here, the fair administration of justice, based on knowledge of Torah, is a kind act because it supports a civil social environment:
“So as to sustain kind acts, [the Great Assembly] taught that [Torah] should be studied carefully and judged correctly. There is no greater act of kindness than this. This alleviates differences between people, and avoids strife and contention. The result is peace among [all people].” 
Another, older source makes an even stronger statement that kind acts atone for sins as thoroughly, if not moreso, than did Temple sacrifices:
“[TaNaCh] says, ‘I desire mercy, not sacrifice.’ 
From the very first, the world was created only with mercy, as it is said, ‘…The world is built on mercy…’  Once, as Rabbi Yochanan b. Zakkai was coming forth from Yerushalayim, Rabbi Yehoshua followed after him and beheld the Temple in ruins. ‘Woe to us,’ Rabbi Yeshoshua cried, ‘that the place where Israel’s iniquities were atoned for is [now] laid waste.’
‘My son,’ Rabbi Yochanan said to him, ‘be not grieved. We have another atonement as effective as this…It is kind acts, as it is said, ‘I desire mercy, not sacrifice’ .” 
It’s possible that the midrash is saying that mercy/lovingkindness/חסד, which is the third of Rabbi Yochanan’s essentials, is superior to avodah (sacrifice), which is the second.
One might also understand it to be saying that “kind acts” can often require a “sacrifice” on our own part — of time, or labor, or money, etc., and that this personal sacrifice is superior to the ritual sacrifice in bringing about our atonement. Our personal “sacrifice” atones for our sins.
“Mercy,” “Hesed/חסד“, can also be translated as “lovingkindness” or even “love”:
“The world was created on the principle of love [see note 4 below]. Love is one of the attributes of the Divine Mind, and the whole universe is but an expression of this attribute. G-d created the world and its numerous beings in order to have more and more objects on which to lavish His infinite love. Love, whether divine or human, must have an outlet [or: object] for its expression.” 
Rabbi Lichtenstein reminds us that kind acts are not to be valued merely for their visible qualities. In fact, when we act kindly or mercifully, we at the same moment harmonize ourselves with G-d’s own purpose in performing the Creation in the first place.
The Baal Shem Tov similarly taught:
“This I [Rabbi Levi Yitzchak of Berditchev] heard from the Baal Shem Tov, on the verse, ‘The L-rd is your shadow…’ : When a living creature stands by its shadow, clearly, just as the creature moves, so the shadow moves. It is quite the same…with the Almighty. According to the actions of a mortal human being on Earth, so he [or she] is treated by the heavenly realm above. This means that if a man behaves towards his neighbor with the quality of kindness [מדת חסד], the Blessed Holy One likewise treats him with kindness. Hence, how good it would be to behave and act with the quality of loving-kindness always, so as to draw down on oneself Heaven’s corresponding [מדת חסד]; how good it would be for a person, then.” 
Although we shouldn’t do kind acts simply for the automatic response they produce, we should nevertheless be aware that much — perhaps all — of what happens to us is a response to our own thoughts, words and acts. G-d, the milieu in which we live, is ever-responding to what we think, say and do.
Even more deeply, by kind acts, we harmonize ourselves with G-d’s actual essence — with what G-d is — of which all Creation is only varied, changing, impermanent forms.
The world “stands,” then, because by kindness, we express G-d’s Presence in it, repairing the separation that began with a simple act of disobedience in Gan Eiden.
 Pirkei Avot 1:2
 Magriso, Rabbi Yitzhak b. Mosheh; “Ethics of the Talmud; Pirkei Avot (Me’am Lo’ez commentary);” Barocas, David N., trans. and Rabbi Aryeh Kaplan, ed.; Maznaim Publishing Company, © 1979; p. 20
 ibid., p. 21
 Hoshe’ah 6:6
 Tehillim/Ps. 89:3/ עולם חסד יבנה
 Avot d’Rabbi Natan (Avot/Pirkei Avot with midrashic/Talmudic commentary edited by Rabbi Natan) 4:5; Judah Goldin, trans.; Schocken Books, © 1974; p. 34
 Lichtenstein, Rabbi Morris; Jewish Science and Health; Jewish Science Publishing Co., © 1925; p. 127
 Tehillim/Ps. 121:5
 Rabbi Levi Yitzchak of Berditchev; Kedushat Levi; quoted in Dvorkes, Rabbi Yishiahu Aryeh and Joshua Dvorkes; The Baal Shem Tov on Pirkey Avoth; Charles Wengrow, trans.; © 1974 by Rabbi Y. A. Dvorkes; English translation distributed by Feldheim Publishers
(The Baal Shem Tov never wrote an actual commentary on Pirkei Avot. Rabbi Dvorkes collected quotations by the Besht from various sources and arranged them as they related to verses from PA).