Answer:
   
   It is difficult to understand how one reconciles the fact sacrifices
   were demanded in the temple and animals had to slaughtered for G-d,
   with the requirements for compassion for animals (for example, resting
   on Shabbat, freeing the mother bird, and helping an overloaded
   animal). First, note that although animal sacrifices were required,
   they were not to appease a meat-eating god. This is because in
   Judaism, G-d is incorporeal and does not eat.
   
   While it is true that there are clear expectations in regard to proper
   treatment of animals (the hebrew term is "tzar baalei chaim", a
   prohibition from causing pain to living creatures), it is also true
   that the Torah approves of human use of animals. In fact, there are
   detailed laws on how to kill an animal to eat it. If asked to describe
   the Torah's expectations for our treatment of animals (and in fact for
   the whole environment), one could summarize them as follows:
   
   The world and everything on it was created for humankind's spiritual
   growth. Specifically, we are expected to use the physical world to
   enable and develop our spiritual side. That is, some physical acts we
   do so that we continue to exist, which enables us to continue doing
   spiritual acts. Other physical acts we do for their intrinsic
   spiritual value. Often we try to merge the two: taking an act which we
   must do in order to exist, and infuse it with some intrinsic spiritual
   value (e.g., we eat in order to live, but as Jews we do much to change
   the way we eat [blessings, the kosher laws, etc.] to make even eating
   a spiritual act). We therefore have a responsibility to use the
   physical world appropriately. When we use a physical object for
   spiritual purposes, it suffuses that object with spirituality. That is
   to say: humans achieve spirituality through their choices, we have
   free will and our choices matter, and the rest of the physical world
   achieves spirituality by how it is used by human beings.
   
   To use an animal in the development of spirituality (by offering it on
   an altar, or by eating it as part of a holiday celebration) is good
   both for us and for the animal: it makes the creation of that animal
   meaningful. Additionally, the Torah recognized the human capacity for
   personification. Humans who treat animals cruelly develop their
   capacity for cruelty to other humans as well. Humans who treat animals
   kindly develop their capacity to treat humans kindly.
   
   There are thus two considerations in evaluating a human's use of an
   animal:
   
    1. Is it truly useful (preferably in a directly spiritual sense, but
       at least in a spiritualy enabling sense)
    2. Does it develop the human capacity for kindness or for cruelty.
       
   For those interested in this subject, some references for further
   reading are: Talmud Baba Metzia 32a-b and 85a; Talmud Shabbat 128b;
   Maimonides, Laws of Shabbat, 25:26; Sefer Hachinuch, Mitzvah 451;
   Shulchan Aruch, Orach Chaim 223 (very end); Responsa Noda B'yehuda
   Vol1, Yoreh Deah, 10; Responsa Yechava Daat 3:66; and Responsa Igrot
   Moshe Even Haezer 4, 92:3. For information on vegetarianism, compare
   the verses in Genesis 1:29-30 with Genesis 9:3-4, and then see the
   Talmud Sanhedrin 59b and Olat HaRiyah Vol 1 p 292.