A detailed answer by /u/sunagainstgold can be found here. Summarising: your average European Christian of the 7th-12th century wouldn’t know much of non-Christian religion outside of limited knowledge of the pagan religions their forefathers followed. As such, Islam was seen as a polytheistic religion with Mohammed as its chief deity. Later Medieval scholars would gradually understand it as a heretical sect of Christianity, often dubbed Mohammedanism (among variations).