What is it that the polytheists are being told to desist from in this āyah, and is it abrogated?

Imām Ibn al-Jawzī (d. 597/1201) summarized the scholars' opinions in his book "Zād al-Masīr" as follows:

1. It means: "If they desist from their polytheism and fighting you."
2. It means: "If they desist from their disbelief."
3. It means: "If they desist from fighting you" even if they do not give up their disbelief.

According to the first two opinions, the verse is definitive, and the meaning of "then indeed, Allah is Forgiving and Merciful" would be that Allah forgives their polytheism and their crimes.

Based on the third opinion, there are two interpretations of the phrase "Forgiving and Merciful": a. It means: "He is forgiving to you by lifting the obligation of fighting them." b. It means: "He commands you to forgive and show mercy to them." According to this last interpretation, the verse is considered abrogated by the verse of the sword (9:5).