Quoting from a post by another member,
The Muslim Tolerance
There is another aspect of this matter which cannot be found in the edicts of the law, nor can it be enforced by the courts or the government: this is the so-called "spirit of tolerance" which underlies upright attitudes, benevolent dealings, respect for one's neighbors, and all the sincere sentiments of piety, compassion, and courtesy. Such attitude is required in everyday life and cannot be obtained through constitutional legislation or the courts' jurisdiction. The spirit of tolerance is exclusively practiced in Islamic society. It appears in several verses of the Qur'an, which tell of parents who attempted to turn their sons from the unity of God to polytheism: "You bear them company in this life with justice." (Luqman: 15)
Similar too is the call of the Qur'an to righteousness and justice in dealings with the non-Muslims who do not oppose Muslims in their religion: "God forbids you not with regard to those who fight you not for (your) faith nor drive you out of your homes, from dealing kindly and justly with them, for God loves those who are just." (Al-Mumtahanah : 8)
The Qur'an describes the righteous in the following terms: "And they feed, for the love of God, the indigent, the orphan, and the captive." (Al-Insan : 8)
The captives, at the time of this verse's revelation, were polytheists. The Qur'an also explains that there is no harm in incurring expenses on behalf of polytheists who are relatives or neighbors of Muslims: "It is not required of you (O Apostle) to see them on the right path, but God sets on the right path whom He pleases. Whatever good you give benefits you own souls. And you shall only do so seeking the "Face of God." (Al-Baqarah: 272)
Muhammad ibn al-Hasan, Abu Hanifah's colleague and scribe, has reported that the Prophet had sent money to the people of Makkah when they were facing drought. It was to be distributed among the poor, although the Prophet and his companions had undergone a great deal of torture and oppression at the Makkah's hands.
Imams Al-Bukhari, Muslim, and Ahmad related on the authority of 'Asma bint Abi Bakr that she said: "During the covenant with the Quraish, my polytheistic mother came to see me. I asked the Prophet, upon whom be peace, 'O Messenger of Allah, if my mother came to me wishing to see me, should I maintain good relations with her?' He replied, 'Yes you should treat her kindly.
The words of the Qur'an indicate the correct manner of discussion with non-Muslims: "And do not dispute with the people of the book, except with means better (than mere disputation), unless it be with those of them who inflict wrong (and injury). But say: 'we believe in the Revelation, which has come down to us and in that which came down to you. Our God and your God is one." (Al-Ankabut: 46)
This tolerance manifests itself very clearly in the conduct of the Prophet, in his dealings with the people of the book, whether Christians or Jews. The Prophet used to visit them, treat them kindly and with respect, console their sick and deal with them in terms of "live and let live."
Ibn Ishaq in his Sirah (biography of the Prophet) stated: 'When the delegation of Najrani Christians came to the Prophet at Madinah, they entered his mosque in the afternoon to meet him. It was their prayer time, so they began to perform their prayer in the mosque. Some Muslims were about to prevent them from doing so, but the Prophet, upon whom be peace, said, "Let them pray.", So they faced eastward and performed their prayer.'
Based on the preceding incident, Ibn al-Qayyim, a mujtahid scholar, put up a sign in front of the mosque reading "Admission granted to people of the book that the people of the book could perform their prayers in the presence of Muslims was evidently clear to him.
Read more at:
http://www.islamicboard.com/clarifications-about-islam/46087-religious-toleration.html#post790412