This is the excerpt of the Pope's speech (the full one can be found at the same link in PDF format) made at the University of Regensburg, entitled Faith, Reason and the University: Memories and Reflections.

In the seventh conversation...the emperor touches on the theme of the holy war. Without descending to details, such as the difference in treatment accorded to those who have the "Book" and the "infidels", he addresses his interlocutor with a startling brusqueness on the central question about the relationship between religion and violence in general, saying: "Show me just what Muhammad brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached."

The emperor, after having expressed himself so forcefully, goes on to explain in detail the reasons why spreading the faith through violence is something unreasonable. Violence is incompatible with the nature of God and the nature of the soul. "God," he says, "is not pleased by blood - and not acting reasonably is contrary to God's nature. Faith is born of the soul, not the body. Whoever would lead someone to faith needs the ability to speak well and to reason properly, without violence and threats."

IMHO, I believe that what he's said here has been grossly misinterpreted and taken wholly out of context by irrationally raged Muslims. And unfortunately, even our ignorant Malaysian leaders. I wonder if Pak Lah had actually seen the manuscript to the speech before demanding the Pope retract back his speech. He was probably advised to make that statement. I don't believe Pope Benedict XVI to be totally ignorant of what he was speaking. In context it was a speech addressing theology in a University. Had it been politically driven, don't you think it would have been in a different circumstance?

I am behind the Pope's apology. And I don't believe he needs to retract his speech at all. Yes, he may be the leader of the Church. But do you think quoting history in the context of that speech was enough to declare a potential religious war? God have mercy on those who call for blood in times like these.