Often times when I cite a particularly egregious passage from the Bible in an argument with a Christian, they just shrug and say it's not meant be taken literally, that it's parable, or worse - that they don't follow it because they consider it outright wrong.
If scripture can have multiple, and possibly conflicting interpretations, how does one know which one is the right one? And why did this happen in the first place? ie: why does His word need to be interpreted?
You have asked at least three distinct questions in your question... I'm going to answer the one that I think is the most directly answerable, and hope that it satisfies the others as well.
Every written work must be interpreted.
When most people I know ask questions like this, what they're really asking is, "Why wasn't the Bible written in clear, easy-to-understand language, for someone living in my modern, Western culture to understand without any special effort?"
And when phrased that way, the answer becomes rather obvious:
The Bible was not written with modern, Western culture in mind. Nor was any other ancient text, religious or otherwise.
In fact, neither was any of Mark Twain's work.
When we read any literature, we must consider the culture in which it was written, and the audience to whom it was written.
Further, we have to recognize the various genres of literature contained within the Bible. It contains poetry, prose, letters, history, law, genealogies, and likely other categories I'm forgetting at the moment. Each of these must be interpreted differently as well--and always with a mind toward the culture that wrote it, and the audience it was written to.
This question is wide in scope because the Bible is a relatively big book and is very diverse within itself. You may need to deal with each one case by case. But here are some tips.
In general, just apply the normal rules of reading as you would with any piece of literature. If an interpretation feels stretched, then it most likely is.
Read the passage in context of its place within the section, within the Testament, within the whole Bible. Don't randomly pick verses and read them in isolation. Beware of building a major doctrine out of an individual verse (proof-texting).
Understand the section in terms of its own genre. The Bible is made up of many genres and sub-genres. Don't read a narrative or poem as a science text book, or a parable as history. Don't automatically put yourself in the narrative when it doesn't intend to talk about you (it could be leading up to Jesus, e.g. various people like Moses or King David are to be seen as predecessors to him - whether positive or negative).
Try to understand the author's intended meaning. It is a mistake to take the post-modern approach where the meaning lies within each individual reader. E.g. the Gospels were intended by the authors to be historical accounts (Luke 1, Jn 20:30) and they also intended to paint a particular picture of Jesus. E.g. The feeding of the 5000. A modern interpretation of this wanted to explain away the miracle and saw that the boy's act of producing his 5 barley loaves and 2 fish set off an example where everyone else produced their own food - enough to feed everyone. But the author's intention was to show a supernatural sign by Jesus (Jn 6:11, 14).
Understand that the Bible is an historical document written in a particular time, place, and circumstance. E.g. the epistles are personal letters, but they are not directly addressed to us. You may or may not draw timeless doctrines and principles from them. It depends on how the point is made or the nature of what is being said. E.g. John 3:36 ("Whoever believes") is a general sweeping statement.
Look for clues within the text on the actual historical context. Understanding this will often help you understand the meaning of the passage. E.g. in Jn 6:15 they wanted to make Jesus king because of Roman occupation of their land, which is the reason why Jesus goes away - they misunderstood what type of king Jesus would be. Often external references may help but be cautious where modern references want to place a text in a different historical context from what the text itself claims. E.g. Paul did not really write 1 Tim. it often comes from a presupposition that the text is unreliable as an historical document (in which case, why bother reading it at all).
It is usually a mistake to read any part of the Bible allegorically (where there is a moral lesson to the story). Don't read into parables too much. E.g. the parable of the Good Samaritan was famously interpreted by Augustine that the good Samaritan is Jesus, the robbers are the devil, we are the ones being robbed by the devil. This interpretation was arbitrary. There was nothing in the text to indicate this. Otherwise anyone could come up with any interpretation. In this particular case, you need to see why Jesus told this story in response to the lawyer (Lk 10:29).
You can often tell when things are meant to link. It's like when you watch a movie and the characters do/say something that makes you think of something that was hinted at earlier. Use cross-references to help find these links. Sometimes it tells us explicitly E.g. For Lev 16 on temples, priests, sacrifices, see Heb 9. But it's not as simple as looking out the for same word being used.
Recognise that the Bible has an overarching story that spans the entire Bible, a bit like a TV series with individual episodes but with developments throughout the series. Don't expect that if you pick a small section in the middle that you can know what the whole thing is about. The Bible has a beginning and an end with plot development throughout. God set off a grand plan from the very beginning which finally found its climax and fulfilment in Jesus (Lk 24:13-27). You may need a book to help you see the forest from the trees. I recommend God's Big Picture or The Goldsworthy Trilogy as a starter.
I'll answer the second part of your question first. Why does God's word need to be interpreted? All communication is interpreted. Think about a face to face conversation with a friend. When you are listening to them you are watching them for non-verbal cues, looking at their gestures, watching their eyes and facial expressions, and combining all this information with the actual words they are saying to interpret what they really mean to communicate with you. Also informing your understanding is your whole past relationship with this person and their previous communications with you. And this is all with someone you share a language, have the same contemporary culture references, and a genuine interest in hearing what they have to say with no ulterior intention to misunderstand them. Even in this context, misunderstandings can happen. Friends can take offence where it wasn't intended - all because of misinterpreting what was said.
As humans we can be misinterpreted even when we are communicating excellently and we can also flub our communication and make it hard for our hearers to understand. Bearing this in mind we could draw two conclusions about the difficult passages: they are miscommunicated, or our understanding of them is off - because we lack the context or other information. I hold to the second explanation. I would also posit that the Bible is not merely about communicating facts or history, but just like our interpersonal communication, it reveals God's character, personality, and intent to us. If we assume someone has a bad intent towards us, it colors how we listen to them. We are more likely to be offended or angered by them, regardless of their actual intent. The same applies to our friends. We tend to give them the benefit of the doubt when listening to them - and if we can interpret something they say in an offensive way or a benign way, we will usually pick the benign way.
Bearing all that in mind - no Christian you argue with will have a perfect understanding of the Bible - and perhaps they have not engaged the passages you want to argue about. If your question is how can you know without a shadow of a doubt what any particular piece of Scripture is about, then I cannot help. But the real answer to understanding the bits of the Bible that seem outlandish or egregious to you is to make an effort to understand the whole, which will usually put the other pieces in context. Many problem passages are resolved with a better understanding of the whole. Also as you learn about God's character and nature, you begin to form a better understanding of His communication. As a commenter above stated, you can pose the specific examples you are battling with as separate questions, and the community here will do their best to help you understand them.
It is true that some parts of the Bible can be interpreted differently by different people. However, it must be noted that just because some things are not abundantly clear, this doesn't mean that nothing is abundantly clear.
There are many things, and perhaps even most things, that are really not open to interpretation, because the Scriptures are quite clear on them. Such things would include the following:
Things that do have some degree of uncertainty may include the following:
A key thing with interpretation is to seek to understand what the intent of the Scriptures is. Too often we try to use the Scriptures to justify our preconceived notions, and that is unfruitful. When we truly seek the meaning of the Scriptures, the variance in interpretations is certainly minimized. Study of the Scriptures should center on exegesis--not eisegesis (reading into the Scriptures).
There are certainly many who try to read into the Scriptures what they think it ought to teach. This accounts for the vast majority of disparate interpretations.
The Bible can be understood in two ways:
Factually
Every sentence is assumed to be literally true. For this to be the case, then it must be possible to pull out any two verses without them giving different accounts or contradicting each other. However, there are counterexamples such as:
These are the names of the warriors whom David had: Josheb-basshebeth a Tahchemonite; he was chief of the Three;[a] he wielded his spear[b] against eight hundred whom he killed at one time. (2 Samuel 23:8)
This is an account of David’s mighty warriors: Jashobeam, son of Hachmoni,[a] was chief of the Three;[b] he wielded his spear against three hundred whom he killed at one time. (1 Chronicles 11:11)
Then Jesus, crying with a loud voice, said, ‘Father, into your hands I commend my spirit.’ Having said this, he breathed his last. (Luke 23:46)
When Jesus had received the wine, he said, ‘It is finished.’ Then he bowed his head and gave up his spirit. (John 19:30)
We observe that the Christian holy book is not a diary of historical events, but could we treat it as a verbatim record of theological doctrine?
Parents shall not be put to death for their children, nor shall children be put to death for their parents; only for their own crimes may persons be put to death. (Deuteronomy 24:16)
Prepare slaughter for his sons because of the guilt of their father. (Isaiah 14:21)
For if Abraham was justified by works, he has something to boast about, but not before God. (Romans 4:2)
Was not our ancestor Abraham justified by works when he offered his son Isaac on the altar? (James 2:21)
The Father and I are one. (John 10:30)
If you loved me, you would rejoice that I am going to the Father, because the Father is greater than I. (John 14:28)
The limitations of this method are evident as it cannot reconcile these apparent discrepancies. If Scripture could be fully appreciated with this technique, then it would be so obvious as to leave no room for uncertainty or doubt. It would have the same implications as God appearing in all his majesty: faith would be rendered obsolete and free will would cease.
A common trap
A further temptation of this strategy is that we choose individual sentences that at face value support our values and lifestyle. We may pick others to malign those outside our social and family circles in an effort to diminish or hide our own deficiencies. Frequently, the people close to us will have performed the same contortions assuring us that together we must be on the right track. By our own measurement, our failings are so minor that they can be ignored and we can celebrate our moral superiority over others.
...Let anyone among you who is without sin be the first to throw a stone at her. (John 8:7)
Some people go much further. On successfully delving for verses that appear to justify their political views, they insist both that the Bible is inerrant and that their interpretation of it is literal. This enables them to claim Divine backing for living out their prejudices and discriminating against those who are different to or don't agree with them. The resulting stain on Christianity polarises the church, drives potential worshippers away and arms those who want to discredit the religion. Reading passages according to the letter will conflict with the opinions, habits or employment of even the most fastidious rule follower eg.
...nor shall you put on a garment made of two different materials. (Leviticus 19:19)
If a man is righteous — if he ... does not take advance or accrued interest... (Ezekiel 18:5-8)
but any woman who prays or prophesies with her head unveiled disgraces her head... (1 Corinthians 11:5)
...it is easier for a camel to go through the eye of a needle than for someone who is rich to enter the kingdom of God. (Matthew 19:24)
There is perhaps some value in treating the Bible like a rule book for those with underdeveloped critical thinking skills such as children. The reality is that everyone else comprehends it as outlined next (even if they say otherwise).
Contextually
Here, factors like genre, historical situation, cultural background, audience and author's intent are taken into consideration. It is important that this analysis be done rigorously and impartially, otherwise we risk moulding the words to suit our own desires.
The correct use of this approach comes from Jesus when he cures a sick woman rather than upholding an uncompromising law:
...whoever does any work on the sabbath day shall be put to death. (Exodus 31:15)
His priestly opponents challenge him and he responds:
a man was there with a withered hand, and [the Pharisees] asked him, ‘Is it lawful to cure on the sabbath?’ so that they might accuse him. He said to them, ‘Suppose one of you has only one sheep and it falls into a pit on the sabbath; will you not lay hold of it and lift it out? How much more valuable is a human being than a sheep! So it is lawful to do good on the sabbath.’ (Matthew 12:10-12)
It is hard to imagine how bewildering and shocking it must have been for those present to witness this reinventing of the rules, let alone the subsequent miraculous healing. The lesson for us today is that if we are able to read the sacred book without ever feeling challenged then we are certainly missing something.
It might at first glance appear logical to use the factual approach for some passages but not others. Since It is not clear how to do this, we risk making arbitrary decisions, jeopardising our objectivity. One seemingly obvious route would be to treat the two Testamants differently, but the following pronouncement from Christ shows that this is erroneous:
"‘Do not think that I have come to abolish the law or the prophets; I have come not to abolish but to fulfil. For truly I tell you, until heaven and earth pass away, not one letter, not one stroke of a letter, will pass from the law until all is accomplished. Therefore, whoever breaks one of the least of these commandments, and teaches others to do the same, will be called least in the kingdom of heaven; but whoever does them and teaches them will be called great in the kingdom of heaven." (Matthew 5:17-19)
In other words, if we want to take the New Testament literally, we must do the same with the Old. Perhaps the only community whose lifestyle comes remotely close to what this entails are the Amish. However, while their piety is admirable, inconsistencies such as those in verses outlined earlier strongly point towards the validity of studying context. Religious (as opposed to personal) conviction can be helpful in guiding our understanding.
What part does Conviction play in our life?
There are two types: religious and personal. The former, which we receive from God, guides us towards virtues and away from sins. The latter can also do this, but the danger is it can be misdirected so that we firmly believe we are right when in fact we are not. At its worst, we can mistake our own bigotry for Divine inspiration, which at various times throughout history has led to great wrongs being perpetrated in the name of the Almighty.
Hence, distinguishing between the two is very important, but not easy. How do we do so? One approach for Christians is to imagine what Jesus would do in the same situation. We must be careful not to confuse what we wish he would do which might only strengthen our prejudices with what we honestly expect him to do.
