Calling religion delusional has become an increasingly popular strategy for its critics. To my ear, there's more to this than just a benign slight -- there's at least the hint of the pathological. Religion can be delusional, but to think it inherently so is to misunderstand both religion and delusion.
Having spent my entire professional career around psychologists, I'm all too aware of how clinicians cringe when diagnostic terms get tossed about willy-nilly. So let's begin with what the latest APA Diagnostic and Statistical Manual (DSM IV-TR, p. 821) says about delusion:
A false belief based on incorrect inference about external reality that is firmly sustained despite what almost everyone else believes and despite what constitutes incontrovertible and obvious proof or evidence to the contrary. The belief is not one ordinarily accepted by other members of the person's culture or subculture (e.g., it is not an article of religious faith).
Note that the manual almost gives religion a free pass on the delusion issue, which for some might end the discussion right there. But let's assume that this is too generous and push ahead anyway.
Delusions of persecution and grandeur are two of the more common forms among those requiring psychiatric care. So if I believe I'm the king of England despite considerable evidence otherwise ("Where are my scepter and my subjects? Good God, what I am doing in South Louisiana?"), then there may be psychological trouble brewing. Maintaining my belief very likely requires convoluted explanations for why the world seems organized such that my assertions of royalty are contradicted at every turn. The mental gymnastics exact a toll, and herein lies a second critical aspect of pathological delusion: the person's ability to function effectively in the world is compromised. Delusional individuals are often highly distressed, as are those around them.
As with any psychological disorder, functional impairment is key. Perfectly normal people hold all kinds of beliefs based on partial or equivocal evidence -- the vagaries of human life make this unavoidable. So the standard for determining whether or not religious beliefs are delusional is the same as that required for any belief: is the belief contradicted by so much obvious and convincing evidence that in order to maintain it the believer becomes functionally compromised, producing suffering for themselves and those around them? In general the answer here is no, for a number of reasons.
First, religions largely traffic in beliefs that stand outside of easy evidentiary evaluation -- in other words, religious notions tend to be neither verifiable nor falsifiable. For example, most of the global religions have long-standing rituals designed to provide cleansing of the soul or forgiveness of sins. There's a far shorter history (if any at all) of rituals that protect one from bullets or other lethal projectiles. Rituals claiming to accomplish the latter are simply too easily refuted by evidence. What gets winnowed out of religions over time are those practices or notions that place too great a strain on credulity. The ideas that remain are stubbornly oblique to empirical analysis. It's very hard to prove or disprove whether a benevolent God exists, or that the universe has purpose, or that man has a spiritual as well as material nature. Whatever evidence one might raise on these questions is, at best, ambiguous and open to multiple interpretations.
Second, an important finding that has emerged over the past 20 years or so from the cognitive science of religion is that religious thinking builds quite seamlessly on our natural modes of cognition. By evolutionary design, we tend to see the world in terms of intentional, meaningful patterns. Religious thinking simply takes this mode of thought to its very logical conclusion: we're inclined to think the world is an intentionally created, meaningful place because it is. Since religious thinking comes naturally to us, it is actually the skeptical mindset that requires greater effort to consistently maintain. Which leads to an interesting hypothesis: given the relatively greater mental effort required to maintain skeptical beliefs, it should be atheistic thinking, more so than religious thinking, that is prone to slide into pathology.
Finally, since religion is a community-based enterprise, it largely discourages disengaged individualism. While this has its hazards -- lock-step conformity, tribalism, narrow-mindedness, etc. -- it does promote social integration among its members and that is generally good for psychological functioning. The religions we have with us today did not just drop from the sky, they evolved, with a primary selection criterion being how well they created trusting, cooperative groups motivated for collective action. The motivations they employ and the actions they engender may be good or bad from an outside perspective; but, by and large, being part of a tight-knit social group is psychologically beneficial for its members.
Thus, there really is a critical difference between someone worshiping Chewbacca the wookiee in his basement and someone going to church. Since most of us believe that Chewbacca is a fictional character (albeit not one without a certain hairy charm) and not a deity, the wookiee-worshiper is largely singular in his liturgical activities. He must disengage from the community, while at the same time doing a fair amount of mental work to maintain his 'wookiee-as-deity' beliefs in the face of a 'wookiee-as-Star-Wars-character' world. This may or may not be delusional, but it's at least worrisome. By contrast, religion requires engagement with a community and this typically facilitates adaptive functioning.
Religion therefore contains a host of properties that actually militate against pathological delusion: (1) its general notions and practices are not obviously contradicted by evidence, (2) it requires very little mental effort to sustain most religious notions, and (3) it encourages community integration which promotes healthy psychological functioning. Indeed, most empirical studies confirm that religious people tend to be happier and healthier, as well as financially, socially, and interpersonally more successful than their non-religious counterparts -- wholly inconsistent with the religion-as-delusion theory.
All of this, however, should not be taken to mean that religion can never be delusional. David Koresh and Jim Jones are probably good examples of religious leaders whose delusional beliefs about their own self-importance proved disastrous for them and their followers. Likewise, parents whose belief in faith-healing blinds them to the damage they inflict on their children by refusing standard medical care are probably tainted psychologically as well. Religious delusion is out there, but recognizing it requires us to give up the simple-minded broad-brush approach. It was Freud (who thought religion was delusion!) who said that the healthy psyche should be able to do two things: love and work. Good guideposts whenever we are in the precarious posture of judging others' beliefs.