More can be said about the very early period of Islam, but I've answered a couple of previous questions about the later medieval period that might be helpful:

I'm a crusader heading towards the Holy Land in 1096. How much do I understand about Islam?

Why and when did westerners stop referring to Muslims as Mohammedans?

Very briefly, it was considered a form of paganism, or a heretical form of Christianity. The idea that there could even be another new religion did not really occur to ancient/medieval Christians.