The reasoning of your heart decides what you do. Probably when kanji was being made people thought that the heart directed our actions, not our brains. So, if you think about it that way, the reasoning of your heart is your mental state. Nowadays that's known as psychology.
This is a jukugo word, which usually means on'yomi readings from the kanji. If you know the readings of your kanji you'll know how to read this as well.
I never understand my mother's mentality.
My sister went to college to become a psychological counselor.
In most cases, you can tell the person's mental state from their gesture.