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 jizya (a tax for non-Muslims), then leave their way free. Lo! Allah is Forgiving, Merciful.
The Quran calls non-Muslims by many names, including "the idolaters." So this verse tells Muslims to ambush, capture, and kill non-Muslims wherever they can be found.
This is the second to last chapter, chronologically speaking. The last chapter doesn't say much, so chapter 9 is essentially the last word on how to deal with non-Muslims.
And verse 5 is a good summary of the general message of the whole last chapter.
Notice that the verse uses the term, "wherever." This is an open-ended term. And so is "the idolaters." These are not specific. It doesn't say tomorrow at a particular place and time, kill specific people. And it is the open-ended, for-all-time nature of this verse (and others like it in the Quran) that has caused the deaths of 270 million non-Muslims at the hands of Muslims in the last 1400 years.
The second part of the Verse of the Sword is interesting. It says Allah is so forgiving and merciful that if those you have captured and not yet killed agree to live with the second-class status of a Jewish or Christian dhimmi (not a Hindu, atheist, agnostic, animist, Buddhist, or Taoist dhimmi) and pay a tax that only non-Muslims must pay (usually 25-50 percent of their income), — if the non-Muslims agree to this, then Muslims are commanded to do the merciful, forgiving thing and let them live.
This verse could be called "The Islamic Way to Deal With Non-Muslims in a Nutshell."
People who complain about "intolerence" toward Muslims seem to assume the reasons for the intolerance don't matter or come out of nowhere. Does the Quran's last word on how to deal with non-Muslims make you feel warm and fuzzy toward the Muslims living in our midst?
Have you ever heard a Muslim admit any of this? For example: "Yes, I acknowledge that our holiest of holy books contain these violent passages, and that they have not been abrogated, and I acknowledge that mainstream Islam, throughout history and up to the present time, has subscribed to these teachings, but I personally completely reject them."
Until a Muslim has said something like this, we must assume she or he subscribes to these teachings too.
The Verse of the Sword and Jihad
See which verses are abrogated by the Verse of the Sword.