Pure and rational religion, free from every mixture of absurdity, imposture, or fanaticism, such as wise men have in all ages of the world wished to see established"--Adam Smith, Wealth of Nations.
Since you are pleased to inquire what are my thoughts about the mutual toleration of Christians in their different professions of religion, I must needs answer you freely that I esteem that toleration to be the chief characteristic mark of the true Church. For whatsoever some people boast of the antiquity of places and names, or of the pomp of their outward worship; others, of the reformation of their discipline; all, of the orthodoxy of their faith — for everyone is orthodox to himself — these things, and all others of this nature, are much rather marks of men striving for power and empire over one another than of the Church of Christ. Let anyone have never so true a claim to all these things, yet if he be destitute of charity, meekness, and good-will in general towards all mankind, even to those that are not Christians, he is certainly yet short of being a true Christian himself. "The kings of the Gentiles exercise leadership over them," said our Saviour to his disciples, "but ye shall not be so." The business of true religion is quite another thing. It is not instituted in order to the erecting of an external pomp, nor to the obtaining of ecclesiastical dominion, nor to the exercising of compulsive force, but to the regulating of men's lives, according to the rules of virtue and piety.--John Locke, A Letter Concerning Toleration.
The first paragraph of Locke's Letter (recall), announces two themes: (i) the mutual toleration of Christians, and (ii) a re-definition of religion, including, but not limited to, Christianity. The first theme is developed at length in the unfolding of the argument of the Letter. This argument is treated with such detail that one might miss the second one altogether.* The second, which will be my focus here, is announced by Locke's repetitive use of "true" and calls attention to a set of implied definitions of a "true church," a "true Christian," a "true religion," and, glancing ahead "true piety." Let's take these in turn.
All churches are voluntary associations that, crucially, allow their members a right of free entry and exit and that aim at public worship of God in order to save their souls. ("A church...I take to be a voluntary society of men, joining themselves together of their own accord in order to the public worshipping of God in such manner as they judge acceptable to Him, and effectual to the salvation of their souls.") A church is, then, a "spontaneous society" (in the sense that Hayek made famous).
Within the class of churches only those churches that tolerate other churches are true churches. This entails (a) that some organizations that call themselves a "church"are not, in fact, churches according to Locke (because, say, one is forced to join them), and that some churches in Locke's sense are (b) false churches because they are unwilling to be tolerant toward other churches and individuals.
Now, Locke's definition is manifestly directed against religious organizations that encroach on the roles/power/duties of the magistrate/government, that is that seek after worldly power, or a group that wish to enlist government to impose a religious monopoly on its behalf. Locke's "true church" is compatible with some versions of Christianity (but, not, say, Calvinism as practiced in Geneva or the Dutch reformed Church or Roman Catholicism of his own day), but not intrinsically Christian. Locke makes clear that true churches are compatible with species of paganism, Judaism (but not the Biblical, theocratic kind), and certain forms of Islam (especially Shiites awaiting the 12th Imam).
In order to be a true Christian it is necessary and, it seems, sufficient that one exhibits "charity, meekness, and good-will in general towards all mankind." What's astonishing about this is not just that doctrine is irrelevant, but one does not even require (as Hobbes suggest) faith that Christ is the savior. This is an embrace of Christian pacifism ("meekness) and a doctrine of cosmopolitan humanitarian works ("charity...good will," etc.) It turns Christianity into a purely moral doctrine.+ Interestingly enough, while to be a member of a true church requires one to be committed to a bit of metaphysics -- there are immortal souls that can be saved, this is asserted axiomatically in the Letter --, to be a true Christian requires no such commitment.
True religion also makes no claim to worldly power and is wholly opposed to the "art of ruling." It is a code/ethos of conduct in accord with virtue and piety. This code of virtue is intrinsically pacifistic (it's a "Gospel of peace" and only persuades by offering exemplars in "holiness.") And it is primarily (but not wholly, as I'll argue) directed at "the inward and full persuasion of the mind; and faith is not faith without believing." The proper moral sentiment directed at true religion is love, and it is generated by exemplars in holiness and purity in doctrine.**
As a Straussian aside, Locke does not define a true ruler, but it seems to require something wholly opposite to believing a true religion. That is, Locke does not defend political pacifism and holiness.
I have suggested that true religion is largely a private, inward affair. But it should be noted that even true religion has a social function: it also includes piety. Not, unlike Spinoza, Locke exploits the ambiguity between Christian and Republican piety, but what he has in mind with 'piety' just is obedience to state/law. I cannot prove this conclusively because Locke is very terse on the nature of true piety in the Letter, but it is suggested by this sentence: "A good life, in which consist not the least part of religion and true piety, concerns also the civil government; and in it lies the safety both of men's souls and of the commonwealth." Here piety seems to be linked to the safety of the commonwealth (in the way that religion is devoted to the safety of men's souls).
But there is good independent evidence for the thought of the previous paragraph. The most notorious doctrine of the Letter is the exclusion of those that "deny the being of a God" from the circle of toleration. The reason for this is that such folk lack fear in God, and therefore cannot be entrusted with "Promises, covenants, and oaths, which are the bonds of human society." That is to say, while Hobbes lets the state play the role of a fear-inducing "mortal God," Locke requires a fear-inducing belief in a God(s) that punish(es) in the afterlife to secure the sanctity of tacit and explicit contracts. (Locke clearly does not wish for a fear-inducing state; he also seems to think that desire for good reputation is not sufficient to secure contracts.)
Note, by the way, that (i) if one can promote sanctity of contracts without God or fear, then Locke's argument in favor of intolerance toward atheists is not required; (ii) that because Locke does not promote religious inquisitions, a quiet (prudent) atheist is to be tolerated. (There are echoes of Plato's Laws here.) This, too, is Spinozist, but -- unlike (Voltaire's) Spinoza who seems to allow a society of atheists (recall) -- it follows Locke is hostile to what one might call a secular, Enlightenment party/movement unless they can promote a civic religion devoted to the sanctity of contracts based on inward faith--one may understand certain species of peace-loving Libertarianism as the optimistic pursuit of this option in which all voluntary contracts take on the characteristics of a Lockean church.
*Here's unscientific evidence: this week, my forty-plus students have to do a weekly assignment ahead of class, and they all focused on the first theme.
+Here, as elsewhere, Locke echoes Spinoza in non-trivial ways, as Wim Klever has argued.
** The content of this doctrine seems to be primarily good works toward others and an austere sexual morals.