Jews and Christians did retain some freedom under Muslim rule, providing they obeyed certain rules. Although these rules would now be considered completely unacceptable, they were not much of a burden by the standards of the time, and in many ways the non-Muslims of Islamic Spain (at least before 1050) were treated better than conquered peoples might have expected during that period of history.
they were not forced to live in ghettoes or other special locations
they were not slaves
they were not prevented from following their faith
they were not forced to convert or die under Muslim rule
they were not banned from any particular ways of earning a living; they often took on jobs shunned by Muslims;
these included unpleasant work such as tanning and butchery
but also pleasant jobs such as banking and dealing in gold and silver
they could work in the civil service of the Islamic rulers
Jews and Christians were able to contribute to society and culture
The alternative view to the Golden Age of Tolerance is that Jews and Christians were severely restricted in Muslim Spain, by being forced to live in a state of 'dhimmitude'. (A dhimmi is a non-Muslim living in an Islamic state who is not a slave, but does not have the same rights as a Muslim living in the same state.)
In Islamic Spain, Jews and Christians were tolerated if they:
acknowledged Islamic superiority
accepted Islamic power
paid a tax called Jizya to the Muslim rulers and sometimes paid higher rates of other taxes
did not try to convert Muslims
complied with the rules laid down by the authorities. These included:
restrictions on clothing and the need to wear a special badge
restrictions on building synagogues and churches
not allowed to carry weapons
could not receive an inheritance from a Muslim
could not bequeath anything to a Muslim
could not own a Muslim slave
a dhimmi man could not marry a Muslim woman (but the reverse was acceptable)
a dhimmi could not give evidence in an Islamic court
dhimmis would get lower compensation than Muslims for the same injury
At times there were restrictions on practicing one's faith too obviously. Bell-ringing or chanting too loudly were frowned on and public processions were restricted.
Many Christians in Spain assimilated parts of the Muslim culture. Some learned Arabic, some adopted the same clothes as their rulers (some Christian women even started wearing the veil); some took Arabic names. Christians who did this were known as Mozarabs.
The Muslim rulers didn't give their non-Muslim subjects equal status; as Bat Ye'or has stated, the non-Muslims came definitely at the bottom of society.
Society was sharply divided along ethnic and religious lines, with the Arab tribes at the top of the hierarchy, followed by the Berbers who were never recognized as equals, despite their Islamization; lower in the scale came the mullawadun converts and, at the very bottom, the dhimmi Christians and Jews.
Bat Ye'or, Islam and Dhimmitude, 2002
The Muslims did not explicitly hate or persecute the non-Muslims. As Bernard Lewis puts it:
in contrast to Christian anti-Semitism, the Muslim attitude toward non-Muslims is one not of hate or fear or envy but simply of contempt
Bernard Lewis, The Jews of Islam, 1984
An example of this contempt is found in this 12th century ruling:
A Muslim must not massage a Jew or a Christian nor throw away his refuse nor clean his latrines. The Jew and the Christian are better fitted for such trades, since they are the trades of those who are vile.
12th Century ruling
Why were non-Muslims tolerated in Islamic Spain?
There were several reasons why the Muslim rulers tolerated rival faiths:
Judaism and Christianity were monotheistic faiths, so arguably their members were worshipping the same God
despite having some wayward beliefs and practices, such as the failure to accept the significance of Muhammad and the Qur'an
The Christians outnumbered the Muslims
so mass conversion or mass execution was not practical
outlawing or controlling the beliefs of so many people would have been massively expensive
Bringing non-Muslims into government provided the rulers with administrators
who were loyal (because not attached to any of the various Muslim groups)
who could be easily disciplined or removed if the need arose. (One Emir went so far as to have a Christian as the head of his bodyguard.)
Passages in the Qur'an said that Christians and Jews should be tolerated if they obeyed certain rules