Well, that's an extremely broad question, but in simplest terms there were different standards of what it takes to be tolerant. When most people think of "tolerance", they assume you mean complete acceptance or even appreciation and love because they associate the word with modern treatment of minority groups like disabled people or gays. "Tolerance" when referring to the stance of the Medieval/Early Modern Islamic states on dhimmis means they usually "tolerated" them, allowed them to exist as long as they behave, and not much more than that.

From the earliest days of Islam, Christians were by no means equal to Muslims. Some of the earliest Islamic rules regarding the treatment of dhimmis (ascribed to the Arab Rashidun caliphate for a very long time) forced non-Muslim dhimmis all over the Middle East and North Africa to shave the front of their heads distinguish them from Muslims after conquering those lands from Byzantines, and forced them to be essentially second class citizens. It was an official rule for dhimmis particularly Christians.

https://sourcebooks.fordham.edu/source/pact-umar.asp

If you read this, it won't seem very tolerant to you. In reality, though, the part of the reason why the Rashiduns were so successful in Syria, for example, is that the Monophysites were oppressed by Constantinople and wanted Arab dhimmi status. Note, however, that the pact of Umar itself is debatable in origin in regards to its association with Umar I, the sahaba. It might be related to another Umar (like Umar II, the Ummayad caliph) or even someone entirely different in name (9th century Mujtahids). Regardless of its authenticity, however, its importance in medieval Islam is huge (you can make an analogy with Donatio Constantini, the most impactful forgery of the Middle Ages, if you wanna).

For example, in the Ottoman Empire (I'll use Balkans as an example), which was relatively tolerant, dhimmi status meant that Christians had to pay jizya (plus countless other taxes both to the state and the timarli sipahi) or kharaj, couldn't ride horses, bear arms or ride atop horses and camels and had to stick to autistic regulations such as that churches and any other buildings owned by Christians were forbidden to be taller than mosques or Muslim-owned buildings (their houses could not overlook those of Muslims). Their religious practices were severely circumscribed (e.g., the ringing of church bells was strictly forbidden). Additional, irregular taxes like Avarız and Nüzül were gradually increasing and/or gradually becoming regular taxes. In meantime, the Ottomans never established full control over the countryside, which was infested with various types of guerillas, brigands and highwaymen; hajduks, hussars, klephts, uskoks, kachaks, fedayis etc. The Christian militiamen (such as the Armatoloi) that the Ottomans hired so as to enforce order were corrupt and engaged in ethnic/religious nepotism and collaboration with their kin and compatriots. The refusal of the Christians to accept Ottoman rule would then lead to suppression by the Ottomans, church-burnings, massacres, looting etc. which would then be retributed by nearby guerillas. Tolerance just meant permanent semi-warfare in some cases, though this can't be blamed entirely on the Ottomans. Additionally, your regional representatives to the Sultan had to be Turkish speaking Muslims, which impaired the representation of local interests, very rarely however like in the case of Mehmed Pasha Sokolovic did they build many bridges for their partly Christian community and allow for legal slack. On the other hand, the Ottomans received a large chunk of the funds for the treasury from jizya collected from Christians and Jews, so from a purely economic point of view they weren't particularly compelled to just go around converting everyone.

And it's important to note that the dhimmi system in the Ottoman Empire was largely based upon the Pact of Umar (controversies aside, it was still taken seriously at the time), and was by no means "atypical", you'll find the similar pattern all over medieval and early modern Islamic states. The client status established the rights of the non-Muslims to property, livelihood and freedom of worship but they were in essence treated as second-class citizens in the empire and referred to in Turkish as gavours, a pejorative word meaning "infidel" or "unbeliever". The clause of the Pact of Umar which prohibited non-Muslims from building new places of worship was historically imposed on some communities of the Ottoman Empire and ignored in other cases, at discretion of the local authorities. Although there were no laws mandating religious ghettos, this led to non-Muslim communities being clustered around existing houses of worship. There were exceptions to this rule, though, like the Phanariotes, the Janissaries, the Jewish financiers, and Armenian merchants, who enjoyed a rather privileged status. And there were occasional concessions to the Christian population, for example Mehmet II founded the Armenian patriarchy which still exists and is the main head of the Armenian church. Patriarchy of Peć was likewise re-established by the Ottomans (of course, with a decent tax burden in form of kesim, peskes, obligation to pay for berat...). And so on, there are quite a few examples like these.

Many of the Christian groups under Islamic rule (in general) weren't harmed, but they were often not allowed to proselytize, display crosses or other religious symbols of Christianity/Judaism, declare their faith in front of Muslims, their testimony against Muslims by Christians and Jews was inadmissible in courts of law wherein a Muslim could be punished; this meant that their testimony could only be considered in commercial cases. They were subject to extra taxation such as the aforementioned Jizya (which in the Quran is characterized as the submission of the infidels to Islamic rule) and many other taxes that were paid exclusively by Christians. Any child born of a mixed religious relationship was automatically classified as a Muslim, even if they practiced Christianity.

To sum it up, relatively speaking, in comparison to the Christian states of the same period(s), Islamic states weren't particularly intolerant. Very often they really did allow for more freedom for their religious minorities than the Europeans did, but by today's standards that treatment is still extremely discriminatory. So the question you should be asking is not why Islamic countries became so intolerant, but rather why Christians became so tolerant? (hint: the Enlightenment)

PS: I used the Ottomans as an example because a) their empire is very well-documented b) the question is too broad to talk about more than a millennium of Islam as a whole. If you're interested in something specific, feel free to ask :))