Overall meaning : It was Allah alone who restrained the idolaters’ hands from you, believers, and your hands from them, while you were in Al-Hudaybiyyah—the Valley of Makkah—after He had made you victorious over them. Allah sees all that you all do.
It was these Quraysh idolaters who rejected the truth, hindered you from entering the Sacred Mosque in the year of Al-Hudaybiyyah and even prevented your sacrificial animals from reaching their place of sacrifice in Makkah!
Had it not been for the fact that there were among them in Makkah oppressed believing men and women unknown to you who keep their faith hidden and whom you might have unintentionally killed upon your entering Makkah victoriously, thereby incurring guilt or distress as a result of doing so unwittingly, Allah would have otherwise permitted you to enter Makkah.
It was not Allah’s will to let you fight the Quraysh unbelievers in the year of Al-Hudaybiyyah, so that He would admit into Islam whomever He wills among the residents of Makkah before your entering it victoriously. Had these two groups stood apart, such that the unbelievers in Makkah were clearly distinguishable to you from the believers there, We would have allowed you, believers, to attack these unbelievers and We would then have inflicted a grievous punishment on them at your hands.
While the bigotry and pride of ignorance was holding its sway in the hearts of the unbelievers by setting the unjust terms of Al-Hudaybiyyah truce, Allah sent down tranquillity, patience and steadfastness on His Messenger and on his believing companions and made them steadfastly adhere to the requirements of the Word of Piety (that is, the testimony of faith: There is no god worthy of worship except Allah), for they were more worthy and deserving of it than those unbelievers. Allah has full knowledge of all things.