What Went Wrong?

A dhimmi (also zimmi, Arabic: ذمي‎, plural: اهل الذمۃ, ahl al-dhimma) is a "free" (i.e. non-slave), non-Muslim subject of a state governed in accordance with sharia — Islamic law. A dhimmi is a person of the dhimma, a term which refers in Islamic law to a pact contracted between non-Muslims and authorities from their Muslim government. This status was originally only made available to non-Muslims who were People of the Book (i.e. Jews and Christians), but was later extended to include Zoroastrians, Mandeans, and ultimately also Hindus and sometimes Sikhs.[1] The status of dhimmi applied to millions of people living from the Atlantic Ocean to India from the 7th century until modern times.[2] Over time, many dhimmis converted to Islam. Although forced conversion played a role in some later periods of Islamic history, most conversions were voluntary and happened for a number of different reasons.[3]

Dhimmis were allowed to retain their religion and guaranteed their personal safety and security of property, in return for paying tribute to Muslims and accepting Muslim supremacy,[4] which involved various restrictions and legal disabilities placed on them, such as prohibitions against bearing arms or giving testimony in courts in cases involving Muslims.[5] Disarmed and unable to defend themselves in courts, dhimmis were vulnerable to the whims of rulers and the violence of mobs,[6] although persecution in the form of violent and active repression was rare and atypical.[7] While recognizing the inferior status of dhimmis under Islamic rule, Bernard Lewis holds that in most respects their position was "was very much easier than that of non-Christians or even of heretical Christians in medieval Europe."[8]
-http://en.wikipedia.org/wiki/Dhimmi

My general understanding is that the Quran is the most tolerant of the three major monotheistic religions. It is designed to permit such things as masturbation, the protection of non-believers, the prevention of rape, and so on. What went wrong? Why is it now regressive in many parts of the world?*

*Parts of the world with real governments and infrascture. For example: Saudi Arabia is a real country. The Congo is not.