President Obama is a devout Christian who was raised as a Christian. He had a Muslim paternal grandfather named Hussein. However, Obama's father was raised Muslim but became an atheist by the time his wife Ann Dunham (a Christian) gave birth to Barack Obama.
Let me add to the above response. My information comes from the book Barack Obama wrote about his life: Dreams From My Father. President Obama grew up without much concern for religion of any kind. He converted to Christianity over 20 years ago, as a result of being exposed to the faith through his work in black neighborhoods, where the churches were the center of community life.
His Christian faith is very important to him, as is often the case with people who choose their religion, rather than being chosen by it. His grandparents probably grew up in a Christian household when they were growing up in Kansas, but in his memoir, the President described his mother and her parents as "ambivalent." Religion was not important to them. He says they tried out being Unitarians for a while.
Barack Obama's mother could probably best be described as a humanist. She spent her life doing work in Third World countries, trying to create better conditions for people who lived in poverty. She taught him to respect all religions and wanted him to know something about all of them, including Buddhist, Hindu, Christian and Muslim.
Since he actually never knew his father, that branch of the family didn't have any impression on him or on his religious affiliation or practice. His father may have been raised in a Muslim household in Kenya. I say "may," because his paternal grandfather grew up practicing African nature religion. As a grown man, the President's father converted to Christianity for a short time, then decided it was too restrictive. Barack Obama, Sr. belonged to a tribe that practiced polygamy (most African tribes do), and Christianity would not allow him to have more than one wife. So he signed on as a Muslim, where having more than one wife was okay.
Barack Obama's father considered himself an atheist at the time he met Ann Dunham, Barack Obama's mother. Ann Dunham's second husband was an Indonesian who had grown up in a Muslim household, just as nearly everybody in his country had. He was not a particularly religious man, but he did follow the Muslim religion, mixed with a little of the old religion that had been practiced in his country before people were persuaded to Islam.
For two of the four years that Barack Obama lived with his stepfather (from age 6 to 10), he attended a public school where students were required to study the Quran for a few hours each week. During the other two years, he attended a Catholic school where he was required to study Catholicism. Non-parochial schools either didn't exist or did not provide quality educational opportunities.
However, the type of fundamentalist Muslim school that some people say he attended in Indonesia did not exist during the time that he lived there. They only began to pop up several years later. When he was 10, his mother sent him to live with his grandparents in Hawaii so he could get a good American education.
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