Wikipedia has informed me that generally speaking early Muslims did not necessarily force converts unto Islam. So how was there room for a third (or more?) major religion in the mid-east? Why did Jews, Christians and pagans forsake their former beliefs for this newer religion?
If anything Wikipedia understates the matter. There's a growing understanding that non-Arab conquered peoples could not convert to Islam at all in the initial conquests. In order to convert to Islam one had, initially to also Arabize oneself by joining a tribe by finding a mawla, a tribal patron. This could happen in a few ways, for instance by being the servant/slave of the Arab in question and being manumitted into the tribe, or by the marriage of a non-Arab woman to an Arab man.
So to get to the question, why did they convert? Well, at first they didn't, and there's a case to be made that conversion wasn't nearly as total as it seemed. Some 10% of Egypt's population is Christian to this day. As late as the 1920s 20% of the population of Baghdad was Jewish. Rather, once Islam "universalized", particularly following the Abbasid revolution in 750 where the importance of Arab ethnicity was significantly reduced in importance in contrast with being a member of the religious community, the process in most territories took a couple hundred years before they became majority Muslim, e.g. in Persia or in Egypt.
There's a few reasons why native peoples would want to do this. Perhaps obviously but under-appreciated are the purely religious components of Islam. Some people would have genuinely been convinced Islam was the completion of the Abrahamic faiths is the Quran says in Sura al-Maidah, verse 3 (5:3) This day are those who disbelieve in despair of (ever harming) your religion; so fear them not, fear Me! This day have I perfected your religion for you and completed My favour unto you, and have chosen for you as religion al-Islam."
The second and oft-focused reason is the personal benefits associated with converting to Islam. Muslims did not have to pay the Jizya tax that was imposed on non-Muslims. Also the bureaucracy of the state, which was initially coopted so that, for instance, the language and format of currency continued to be Byzantine (i.e. Greek speaking Roman) or Persian depending on the territory, became increasingly dominated by Islamic and Arabic forms. This is particularly true in the reign of Abdul Malik (r. 685-705), who carried out extensive reforms aimed at Islamization and Arabization. The result was that success as a bureaucrat in the state depended on conversion. This was likewise true in the military which was in the initial conquests by definition Arab but not necessarily muslim. Soldiers received substantial rewards for their service which would have been attractive to the local populace.
Then there was of course the social element. The Arab Muslims were in power, they married into the local notable families and developed connections that way in which Islam was placed into a socially and culturally predominant position.
Eventually, again under the reign of Abdul Malik in particular, there was also an explicit campaign of conversion. The Dome of the Rock, which is perhaps the most important demonstration of Islamic state power in the conquered lands, is primarily decorated with those verses from the Quran that appeal to or argue against other Abrahamic faiths.e.g. Quran 4:171 - "O People of the Scripture! Do not exaggerate in your religion nor utter aught concerning Allah save the truth. The Messiah, Jesus son of Mary, was only a messenger of Allah, and His word which He conveyed unto Mary, and a spirit from Him. So believe in Allah and His messengers, and say not "Three" - Cease! (it is) better for you!"
Source wise: Robert Hoyland's In God's Path is a fantastic overview of the conquest period and early reign of the Caliphs. On conversion timelines, see Richard Bulliett's Conversion to Islam in the Medieval Period: An Essay in Quantitative History. It's methodology has been critiqued but is the basis for most of the contemporary scholarship on when and where people converted to Islam.
Another question, also.
I read on a book or some other months ago that states that some of them converted to Islam to avoid the Jizya tax, is this in anyway correct?
Edit: I forgot from what/where I read them from unfortunately.