Why Did God Command Israel to Destroy Entire Nations?

One of the most difficult parts of the Old Testament is God’s command for Israel to destroy entire nations, such as in Deuteronomy 20:16-17:

"However, in the cities of the nations the Lord your God is giving you as an inheritance, do not leave alive anything that breathes. Completely destroy them."

This raises challenging questions:
1. Was this a judgment for extreme wickedness?
2. Was this about protecting Israel from idolatry?
3. How do we reconcile this with the character of a loving God?

How do you understand these difficult passages?