Assalamu alaikum
In which context was this hadith said?
“When you meet your enemies who are polytheists, invite them to three courses of action. If they respond to any one of these, you also accept it and withhold yourself from doing them any harm. Invite them to Islam; if they respond to you, accept it from them and desist from fighting against them. If they refuse to accept Islam, demand from them the jizya. If they agree to pay, accept it from them and hold off your hands. If they refuse to pay the tax, seek Allah’s help and fight them"
[Muslim:19:4294]
It first talks about the "polytheists" which seems to be the pagans of Mecca but then it offers as one of the options the Jizyah paid by the dhimmis who lived under Muslim rule and against whom as far as I know no war was ever waged.
So who exactly are referred to in this hadith?
How can this be reconciled with the claim that forced conversion was never practiced if here they were offered Islam or Jizyah/war?
Thank you.

Buraidah al-Aslami narrated that when the Messenger of Allah (peace and blessings be upon him and his family) appointed a leader for an army or military expedition, he (pbuh) would commend him he and the rest of the army to be mindful of Allah. The prophet (pbuh) then commended: "Fight in the name of Allah and in the cause of Allah. Fight the disbelievers; attack and do not transgress the limits; do not betray; do not mutilate [your enemies' corpses]; and do not kill children. When you meet your enemies from among the polytheists, invite them to three courses of action. If they respond to any of them, accept it and cease fighting. Then, invite them to Islam; if they agree, accept it from them and cease your fighting. Then invite them to leave their homeland and move to Madina where they will be entitled to the same rights and obligations of the Muhajirun. If they refuse to do so, inform them that they will be treated like Muslim Bedouins and they will be subject to the same rulings applied to believers. However, they will not be entitled to any war booty unless they engage in jihad with Muslims. If they refuse, ask them to pay jizya [tax]. If they agree to pay, accept it from them and hold off your hands. But if they refuse to pay, seek Allah's help and fight them" [Recorded by Muslim in his Sahih].

The etiquettes of jihad in Islam
There is nothing in the hadith to indicate that these people were not from among the people of the Book [Ahl al-Kitab]. Rather, the jizya was collected from different people including Ahl al-Kitab and the Zoroastrians of Hajr whom the Prophet commanded to be treated like Ahl al-Kitab [except in marriage and partaking of their food].

This hadith is a moral invitation to abide by the objectives of war. It clarifies the procedures of jihad [fighting in the cause of Allah] which cannot be launched except for defensive reasons or to protect human rights and not to compel anyone to embrace a faith he does not believe in. The hadith instructs Muslims that when they undertake jihad while observing its conditions and regulations, they are not to fight for the purpose of shedding blood; rather, they must refrain from fighting whenever possible through inviting people to Islam or collecting the jizya. Therefore, the hadith does not imply anything relating to compelling people to embrace Islam, but is a noble moral message.