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This is an allusion to the taunt with which most of Muhammad's contemporaries greeted the beginning of his preaching, and with which they continued to deride him for many years. In its wider sense, the above passage relates - as is so often the case in the Qur'an - not merely to the Prophet but also to all who followed or will follow him: in this particular instance, to all who base their moral valuations on their belief in God and in life after death.
People usually call any one mad whose standards are different from their own. And madness is believed to be due to demoniacal possession, an idea distinctly in the minds of the New Testament writers: for Luke speaks of a man from whom the "devils" were cast out, as being then "clothed, and in his right mind" (Luke, viii. 35).