How should we understand the verse "O you who believe! Do not take the Jews and the Christians for friends!"?

can you explain this verse: O you who believe! do not take the Jews and the Christians for friends ?(5-51)

Dear Brother / Sister,

There can be different ideas among Muslims about the foreign policy, and this is quite normal. It should be appreciate within the frame of intellectual freedom. But sometimes we know no bounds in such arguments. For example, someone make some Muslims faithless for they are in favor of NATO (North Atlantic Treaty Organization). They say “By this thought you subscribe to Christians and embrace unbeliefness.” When you try to set him right about his wrong thought, he jumps on you and says; “Doesn’t Quran tell us ‘take not the Jews and the Christians for your friends and protectors…?”  

A part of answer of Bediuzzaman ( an Islamic Scholar) to some circles, who misconceive such verse and are opposed to commercial and military pacts done with Christians, is as follows:  
“Our friendship with them is to appreciate and make use of their civilizations and developments and to keep the peace which is the essence of the world’s happiness. Thus, such friendship is clearly out of prohibition of the Quran.” (Munazarat (Disputation))

By this statement it is stated that making use of technical developments and scientific inventions appeared among the Christians’ world and reaching an agreement with them to keep the peace is not prohibited by the verse.
In the next part of the same issue it is drawing attentions to a point that embracing Jewishness of Jews and Christianity of Christians is prohibited by Quran. And with a perfect example it is confirmed:
“If you have a wife out of the people of book, surely you will love her.” That is to say; if you have a wife out of the people of book _for example out of Christians_ you will love her since she is your wife not because she is Christian.
Thus, being deprived of such sensitiveness costs a pretty penny to Muslims.

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