I am not a historian, and this is no way meant to express the true complexity of the question you are asking, however, the Ottoman Empire employed the Millet system which essentially allowed religious minority groups to govern themselves with little interference from the ruling Ottoman class. The Jews who had been expelled from Spain were accepted into the empire and Jews had their own millet. Each millet was ruled by a religious head (for example, The Patriarch of Constantinople was at times the head of the Orthodox millet) but that religious head was still subordinate to the Sultan. Each millet could create and enforce laws and levy taxes. Disputes between groups would be decided under the law of the millet of the victim, except when a Muslim was involved, as sharia took precedent. Taxes paid to the Sultan were also higher on religious minorities than on Muslims. However, if you were a Muslim, your ethnicity (almost always) did not matter, you were allowed to rise in power and wealth in the empire without having to be Turkish. So in this way, Bosniak Muslims view the Ottoman Empire as having been very tolerant and an overall positive influence on the people. And of course it is important to mention Janissaries. A certain number of young boys would be taken from religious minority communities (Christians) and would be taken to Constantinople, and converted to Islam before being trained to be a soldier. However, while technically slave soldiers, Janissaries often held a considerable amount of respect, wealth, and/or power. So while a complicated issue, not entirely independent of how you define "tolerant" the Ottoman Empire allowed significant freedoms to their religious minorities that would not have been afforded to such minorities in many Kingdoms or Republics of Europe at the time.

Source: The Balkans in World History by Andrew Wachtel.

ottomans had a millet system. in modern turkish millet means nationality however in ottoman's it meant a religious group. it was religion based. nationality is very much a western and a new thing which led to the dissolution of the empire.

what most people don't understand is that they think of ottoman empire straight like turkey. ottomans had a very large territory comprising of a lot of races (called cins) and religions. they all spoke their own language unlike a single language which again is a quite new thing practiced by spanish, french and british empires.

if you wanted to rank up you had to be a muslim regardless of your race. so it was a very much religion based approach. ottomans preferred to leave the local groups to speak their own languages and practice their own religions (as long as they paid their taxes) for it was easier to rule this way.

The Ottomans were very tolerant compared to other nations during the Spanish Inquisition. You have to bear in mind, the Ottoman Empire differed a fair bit in many ways. During the time of Sulayman the Great, they were ahead in a number of ways, after he passed. The Empire went into a period of stagnation (you could even say decline) where they began to lose more on the battlefield, their leadership just wasn't stable and competent enough to control an empire filled with a multitude of ethnicities, religions spanning across 3 continents.

Please don't use Armenian Genocide to connect them. There is nothing in common. About your question : Ottoman Empire was the most tolerant state of its time(untill European tolerance started) in Europe, as long as the members of the other religions paid their taxes. They didn't force convert as well, if they there would be a lot more Muslims in Balkans/Hungary but as we can see Muslims there are mostly Muslims with Turkish descendancy.