I just read that, when they tested the atomic bomb, there was a belief it might light the atmosphere on fire. If they believed this, why did they still test it?

There wasn't much of a belief that this could happen, because it had been considered and refuted by the scientists involved in the development of the first nuclear weapons. In a 1991 interview with renowned physicist Hans Bethe about this very question, he credits Edward Teller as the physicist who first brought up the concern at a 1942 conference in Berkeley.

Teller said, "Well, how about the air? There's nitrogen in the air, and you can have a nuclear reaction in which two nitrogen nuclei collide and become oxygen plus carbon, and in this process you set free a lot of energy. Couldn't that happen?" And that caused great excitement...

Teller at Los Alamos put a very good calculator on this problem, [Emil] Konopinski, who was an expert on weak interactors, and Konopinski together with [inaudible] showed that it was incredibly impossible to set the hydrogen, to set the atmosphere on fire. They wrote one or two very good papers on it, and that put the question really at rest. They showed in great detail why it is impossible. But, of course, it spooked [Compton].

Bethe seems to place blame for the popularization of this idea to Arthur Compton, a colleague of his when working on the Manhattan Project. The addendum to the above article contains links to "The Ultimate Catastrophe", a 1975 editorial by H.C. Dudley in the Bulletin of Atomic Scientists warning of the possibility, as well as a rebuttal by Bethe published some months later. "The Ultimate Catastrophe" references this 1959 interview of Arthur Compton on the matter. In his 1956 Atomic Quest: A Personal Narrative, he provides his own detailed perspective, but ultimately concedes that the fears had been laid to rest.

These questions could not be passed over lightly. Was there really any chance that an atomic bomb would trigger the explosion of the nitrogen in the atmosphere or of hydrogen in the ocean? This would be the ultimate catastrophe...

In due time, the calculations gave the firm result that while the nuclei of hydrogen and nitrogen are indeeed unstable, the conditions under which they can explode are far removed from anything that can be brought about by atomic explosions. (p. 127)

In Memoirs: A Twentieth Century Journey in Science and Politics, Teller refers to the 1942 conference where the prospect of runaway atmospheric fusion was dismissed as a statistical impossibility. Enrico Fermi brought the subject up again in 1945 on the eve of the famous Trinity test, the first detonation of an nuclear weapon. Teller, among other scientists, once again performed the calculations necessary to show that such a catastrophe could not occur.

But when we had completed our proof, Fermi insisted that we go one step further. All we had proved, he pointed out, was that such an explosion could not occur according to known laws of physics. But what presently undiscovered phenomena might exist that, under the novel conditions of extreme heat, might magnify the consequences and lead to an explosion? (p. 210)

Teller admitted that this question occupied his mind in the weeks leading up to the test, but it was at this point more of a curiosity than a genuine concern.