Quran 2:256:There is no compulsion at all in religion; undoubtedly the right path has become very distinct from error; and whoever rejects faith in the devil (false deities) and believes in Allah has grasped a very firm handhold; it will never loosen; and Allah is All Hearing, All Knowing.
Quran 9:5:Then when the sacred months have passed, slay the polytheists wherever you find them, and catch them and make them captive, and wait in ambush for them at every place; then if they repent and keep the prayer established and pay the charity, leave their way free; indeed Allah is Oft Forgiving, Most Merciful.
Quran 48:16:Say to the ignorant who stayed behind, “You will soon be called against a nation of great military strength - to fight against them or that they become Muslims; so if you obey, Allah will give you an excellent reward; and if you turn away, the way you had turned away before, He will mete out a painful punishment to you.”
Quran 109:Proclaim, O disbelievers! Neither do I worship what you worship. Nor do you worship Whom I worship. And neither will I ever worship what you worship. Nor will you worship Whom I worship. For you is your religion, and for me is mine.
Below are excerpts from Tolerance and Coercion in Islam, by Yohanan Friedmann. They are all taken from Chapter 3 of that book, which is titled Is there no compulsion in religion?
Early Muslim compendia of hadith include a number of traditions according to which the Prophet decided to expel all non-Muslims from the Arabian peninsula ....[p. 90]
[pp. 94-5]Quran 2:256, which serves as the motto for the present chapter, has become the locus classicus for the discussion of religious tolerance in Islam. According to the 'circumstances of revelation' (abasid al-nuzul) literature, it was revealed -- surprisingly enough -- in connection with the expulsion of the Jewish tribe of Banu Nadir from Medina in 4 A.H./625 A.D. This expulsion was part of the process by which the Muslims established their dominance in the city. In contradistinction to Quran 109:6, which seems to reflect a Muslim plea against religious coercion practiced against the early Muslims by the Meccan unbelievers, Quran 2:256 appears to be addressing the Muslims themselves. The interpretation of the verse is, however, not without its share of problems. We may legitimately understand it as denying the feasibility of coercion in matters of religion rather than a command to refrain from it....
On the other hand, the Quran contain numerous verses enjoining jihad, which is routinely described as being fought "in the way of God" (fi sabil Allah) and is, in some cases, relevant to the issue of religious freedom. It is well known that the Quranic material on jihad is not consistent .... Perhaps the most famous jihad verse demands the submission of the People of the Book and their payment of jizya. It requires the People of the Book to humble themselves before the Muslims and to pay a discriminatory tax, but it does not instruct Muslims to convert their vanquished enemies in a forcible manner.
Several other verses view the war waged by the Muslims as having a clearly religious goal of killing the unbelievers or expanding the Muslim faith. These are verses which call upon the Muslims to kill the polytheists. The 'verse of the sword' (ayat al-sayf, Quran 9:5) enjoins Muslims to 'slay the idolators wherever you find them, and take them and confine them, and lie in wait for them at every place of ambush." Only if they "repent, and perform the prayer and pay the alms" will they be left alone. Quran 48:16 may also be understood in this way: the expression tuqatilunahum aw yuslimun may refer to conversion to Islam, or to a military surrender. Thus both verses may indicate that the conversion of the enemies to Islam is the purpose of the war and the condition for its cessation. Two verses maintain that the war is being waged in order to achieve religious uniformity, while Quran 3:89 enunciates the principle that whoever desires a religion other than Islam, it will not be accepted from him.
[p. 95]Quran 109 is understood to represent an uncompromising response to a Meccan offer of compromise: the leaders of Quraysh are said to have suggested to the Prophet the creation of a religion consisting of elements from their own beliefs as well as that of Islam. Needless to say, the idea of such a composite religion is preposterous from the point of view of Islam after it's nascent period. The Sura is unequivocal in its rejection of Meccan shirk [polytheism], but it does not demand any action designed to effect its rejection.
Quran 48:16, revealed after the Hudaybiyya treaty of 628, is also relevant to our discussion: "You will be called against a people possessed of great might, to fight them or they surrender" .... This verse poses two questions of interpretation: who are the peopel against whom the fighting will be waged, and what will be the purpose of the war. If yuslimun is taken in its usual Quranic sense of exclusive submission to Allah which is identical with conversion to Islam, the enemies are polytheists: various tribes against whom the Prophet himself fought ... this interpretation of the verse seems to be, historically, the only possible one. In this case, the declared purpose of fighting is to bring about the conversion of the enemy and to accelerate the process of achieving religious uniformity in the Arabian peninsula.[p. 97]
I think it is highly instructive to compare all of the above to what one finds in the Rock Edicts of Asoka (the Buddhist King who ruled most of the Indian subcontinent eight centuries before Muhammad was born):
Beloved-of-the-Gods, King Piyadasi [King Asoka], honors both ascetics and the householders of all religions, and he honors them with gifts and honors of various kinds. But Beloved-of-the-Gods, King Piyadasi, does not value gifts and honors as much as he values this -- that there should be growth in the essentials of all religions. Growth in essentials can be done in different ways, but all of them have as their root restraint in speech, that is, not praising one's own religion, or condemning the religion of others without good cause. And if there is cause for criticism, it should be done in a mild way. But it is better to honor other religions for this reason. By so doing, one's own religion benefits, and so do other religions, while doing otherwise harms one's own religion and the religions of others. Whoever praises his own religion, due to excessive devotion, and condemns others with the thought "Let me glorify my own religion," only harms his own religion. Therefore contact (between religions) is good. One should listen to and respect the doctrines professed by others. Beloved-of-the-Gods, King Piyadasi, desires that all should be well-learned in the good doctrines of other religions.