Well if you consider the entire medieval time, that starts on the 5th century with the fall of the Roman empire and ends on the 15th century, there is quite a change on religion.
Considering only the middle part of the medieval time(when all barbarian tribes are settled and Europe as we know is starting to form), you can say that the religion of the people is the same religion that it´s king.
Even if, for the most part, Kings doesn´t have much power, his figure as choosen by god, is respected. He is seen as having the power to heal and helping, truly speaking for God, this is also represented by the Pope (or a church representative) crowning the king, this is God giving power to a men(wich is why it was bad for Napoleon to have crowned himself in France).
Now there were religions existing in the same place, at the same time, but when the king is from religion A and you have commom people (all the nobles were expected to follow the king´s religion, at least in public) in a village from religion B, they are usually a minority and considered second class people, that should be untrusted and usually lost everything in disputes.
But this is Europe...
most islands in BM don´t follow this, or the medieval like line of tought....even dwilight has a few flaws...but that´s the fun, and it is acceptable if we make a few changes to improve our experience in BM, not History.