It obviously means that the government is going to protect your right to practice whatever faith you want, with the qualification that it cannot involve a government establishment of religion. Your free exercise of religion does not allow you to break the law. That means you can't throw virgins into volcanoes, you can't stone homosexuals, you can't refuse to pay your taxes because you say your property really belongs to God, etc., no matter how important it is to the faith that your practice.
That also applies to the establishment of religion: the Amendment obviously doesn't mean your freedom to express your religion extends to the freedom to use the government to promote that religion. That's why they explicitly stated that as an exception, and they mentioned it first for a reason: because it's incredibly important for religious freedom.
You can't build a church or mosque or temple with government funds, you can't mandate prayer in school, you can't put giant Ten Commandments monuments on government property, or in any way give the impression that the government is supporting the establishment of religion (by the way, atheism is also considered a religion for legal purposes). If the founding fathers intended to allow that kind of "freedom to practice your religion", they wouldn't have added in that first bit prohibiting an establishment of religion.
Cutting the Amendment down to omit that important phrase is misleading in the extreme. Why not cut out the second bit and leave the first? "Congress shall make no law respecting the establishment of religion". Does that mean we can use government funds to bulldoze all the churches in the country, force Muslims to eat during Ramadan, and throw Jews in prison just for the hell of it? You have to read the whole Amendment in its context, and furthermore you have to interpret that Amendment in light of its context in our judicial history. I've noticed that Christians who complain about atheists taking Bible quotes out of context don't really want to take things in context when doing so questions something they desperately want to believe.
An excellent (if lengthy) read on this that is quite relevant is the judge's opinion from the Kitzmiller v. Dover case:
http://www.pamd.uscourts.gov/kitzmiller ... er_342.pdf
â€œOh Neddy, it was terrifying. I thought I was headed for the eternal bliss of paradise!â€