And do not insult those they invoke other than Allah , lest they insult Allah in enmity without knowledge. Thus We have made pleasing to every community their deeds. Then to their Lord is their return, and He will inform them about what they used to do.
The Muslims used to insult the gods (idols) of the disbelievers. In return, they insulted Allaah out of enmity without knowledge.
Allaah revealed this Verse in response to that.
This is the view of Qataadah. Ibn Kathiir has recorded this view from him in his Tafsiir.
When you deal with kaafirs you are not to insult their gods and Religious symbols, not because doing so is wrong, but because it can result in them insulting Allaah.
This result is unacceptable.
At least two important principles are derived from this Verse.
The first principle
درء المفاسد مقدم على جلب المصالح
When a maSlaha (that which is beneficial) collides with mafsadah (that which is corrupt) which is greater than the maSlaha, one is to act to avoid the mafsadah even if that means abandoning the maSlaha.
Insulting false deities is maSlaha. It puts down their religion. It shows how worthless it is.
Doing so can lead to a mafsadah which is far worse.
It can lead the kaafirs to insult Allaah.
Thus, Allaah told us not to do so.
The second principle is
This is commonly translated as blocking the means.
It prohibits a person from doing something permissible when doing so leads to something impermissible.
Here is a simple example
You can dig a hole in the ground.
It is permissible.
However, if you know doing so will lead a person to fall into it, it is now not permissible to dig that hole.
Another example is as follows.
There is a grape seller.
A guy comes to him to buy grapes
Selling grapes is permissible.
The seller knows the guy will make wine out of them.
He is not to sell it to him (keeping in mind the difference of opinion on this particular issue).
These principles can be abused. They have been.
However, the one thing that is certain without a doubt is that when you deal with kaafirs you will not insult their gods or Religious symbols as doing so could lead to them insulting Allah.
Imaam al-Baghawi makes an excellent point when he says the following:
The Zaahir of the Verse forbids insulting the idols, but its reality is that it has forbidden one from insulting Allaah because He is insulted as a result of that (i.e. when you insult their gods and Religious symbols, they will insult Allaah).