The word atonement comes from the phrase in Middle English "At-One-Ment," or to reconcile one to another. In Judeo-Christian terms it means being reconciled or being made right with God (which implies we have a broken relationship with God). Tradition teaches that Jesus' died on our behalf, that Jesus paid for our sins.
In the early days of the Israelite faith the sacrificial system was instituted to provide, in part, a method of atoning for Israel's breach of the holy covenants/ The sacrificial system was meant to provide a gift of food and drink to God (Psalm 50.12-23) and thus appease the angry deity. However, the prophets claimed it wasn't sacrifices God wanted, but mercy, justice, and obedience to the law, summed up as loving God and loving neighbor (cf. Proverbs 21.3; Amos 5.22-24; Micah 6.6-8). Nonetheless, the traditions of the religious faith continued to include the sacrificial system.
When Jesus came with his radical message of love toward the marginalized (the poor, the leper, the outcasts, etc.) The sacrificial system was still a thriving institution. His message was suspect and this gentle rabbi was put to death by the Roman government. Christ's followers were stunned and left with the question of "why?"
In 70 CE the temple in Jerusalem was destroyed and the sacrificial system came to an abrupt end, but not before the church had made an interpretation of why Christ was killed. The "why" was interpreted to be that Jesus had been the sacrifice to end all sacrifices and the letters of Paul most clearly delineate the church's position.
Now it should be noted that in the gospels there are no clear references as to the "why" of Christ's death, though there are allusions to the reason for his life and his message. Instead, it is in the writings of Paul where the weight of Jesus as an atoning sacrifice to appease God appears clearly. Paul postulates that somehow Jesus' death "paid" for our sin, disregarding the scriptures that clearly indicate God is not interested in blood sacrifice (Isaiah 1.11-17; Hosea 6.6; Amos 5.21-24; Psalm 40.6), but rather in right living.
Further, the gospel of John seems to contradict Paul, and since John wrote some years after Paul wrote his letters, it is possible John was making a subtle attempt to refute him. John equates Jesus with the Passover lamb, an animal slaughtered during the ritual remembrance of the Israelite exodus from Egypt. Twice John calls Jesus "the lamb of the world," and he identifies Jesus with Passover lamb at the time of Christ's death (John 19.14-31).
The modern church has generally understood the Passover lamb to be a sin sacrifice, but this is not the case. In Leviticus, where the Passover ritual is described, the animal sacrificed for sin is not a lamb, but a goat--and this goat was killed to cleanse the impurity of the sanctuary, not for the sins of the people. A second goat carried the people's sins, and it was not killed but abandoned in the wilderness. The Passover lamb was sacrificed and eaten by each family celebrating the festival and it could not have been a sin offering because sin offerings were always impure and could not have been eaten. Clearly, John's understanding of Jesus' death does not include him as an atoning, sin-sacrifice.
Nevertheless, the traditions of the church remain and the notion that Jesus was an atonement, a sacrifice for sin to appease an angry God and thus right the broken relationship, prevails throughout Christendom.