What they say –
“In Islam, there’s no compulsion in religion. To you, your religion, to me mine.”
“There is no compulsion in religion. The right direction is henceforth distinct from error. And he who rejecteth false deities and believeth in Allah hath grasped a firm handhold which will never break. Allah is Hearer, Knower.”
The above is abrogated by the following verse:
Quran 9:5 – The verse of sword. Now let us see what this verse is:
And when the sacred months have passed, then kill the polytheists wherever you find them and capture them and besiege them and sit in wait for them at every place of ambush. But if they should repent, establish prayer, and give zakah, let them [go] on their way. Indeed, Allah is Forgiving and Merciful.
Then, when the sacred months have passed, slay the idolaters wherever ye find them, and take them (captive), and besiege them, and prepare for them each ambush. But if they repent and establish worship and pay the poor-due, then leave their way free. Lo! Allah is Forgiving, Merciful.
So when the sacred months have passed away, then slay the idolaters wherever you find them, and take them captives and besiege them and lie in wait for them in every ambush, then if they repent and keep up prayer and pay the poor-rate, leave their way free to them; surely Allah is Forgiving, Merciful.
Then, when the sacred months have passed — that is, [at] the end of the period of deferment — slay the idolaters wherever you find them, be it during a lawful [period] or a sacred [one], and take them, captive, and confine them, to castles and forts, until they have no choice except [being put to] death or [acceptance of] Islam; and lie in wait for them at every place of ambush, [at every] route that they use (kulla, ‘every’, is in the accusative because a [preceding] genitive-taking preposition has been removed). But if they repent, of unbelief, and establish prayer and pay the alms, then leave their way free, and do not interfere with them. God is Forgiving, Merciful, to those who repent.
The essence is that kill the idol worshippers wherever you can. The next verses explain why you can never have treaty with idol worshippers and there are other verses which say that even if you have to make friends with Kafirs, make sure you have hatred against them in your heart. (Surah Imran 28)
(See also - http://www.danielpipes.org/2110/the-issue-of-compulsion-in-religion-islam-is-what-its)
Now, in recent times, many scholars have started arguing that 2.256 was not abrogated and it remains a valid verse of Quran. But this argument is contradictory of facts and itself:
a. If indeed there is no compulsion in religion, why is punishment for apostasy DEATH in Islamic Shariat? Why does no scholar like Zakir Naik or anyone else ever proclaim that Suadi Arabia and all those countries who give death punishment for apostasy and insulting Islam/Prophet are against Islam and anti-Muslim?
b. If indeed this peaceful verse is valid, why is propagation of non-Muslim religions prohibited in Muslim countries?
Further moar ,
It was narrated from Abu Sa’eed al-Khudri (may Allaah be pleased with him) that he heard the Messenger of Allaah (peace and blessings of Allaah be upon him) say, “Do not keep company with anyone but a believer and do not let anyone eat your food but one who is pious.” (Narrated by al-Tirmidhi, 2395; Abu Dawood, 4832. Abu ‘Eesa al-Tirmidhi said: this hadeeth is hasan. It was also classed as hasan by al-Albaani in Saheeh al-Tirmidhi, 2519).
Abu ‘Eesa al-Khattaabi said: Rather he warned against keeping company with anyone who is not pious and against mixing with them or eating with them, because eating with a person instills friendship and love in the heart.
He said: do not make friends with anyone who is not pious; do not take him as a companion with whom you eat and chat.
(Ma’aalim al-Sunan, Haamish Mukhtasar Sunan Abi Dawood, 7/185, 186).