Why does Hinduism have so many Gods?

Contrary to prevailing misconceptions, Hindus or rather Sanatan Dharma does not have a concept of 'God' at all! Ishwara, as understood in our tradition, is not an entity that sits in heaven and does supervision business. Hence even though we use the term God to refer to Ishwara - the idea behind it is completely different from organized religions. In Hindu culture, the primordial factor has always been karma and goal has always been Moksha - from the cycle of births and deaths - not heaven! This is where comparative religion theory fails completely when applied to Hinduism along with Semitic religions. Peoples of India with different languages and cultures have understood the one Consciousness in their own distinct way. This is signified by the Ishta Devta concept - where every person is free to choose his deity of worship.

Through history there arose four principal Hindu denominations— Saivism, Shaktism, Vaishnavism and Smartism. For Saivites, God is Siva. For Shaktas, Goddess  Shakti is supreme. For Vaishnavites, Lord Vishnu is God. For  Smartas—who see all Deities as reflections of the One God—the choice of  Deity is left to the devotee.

This liberal Smarta perspective is well known, but it is not the prevailing Hindu view. Due to this  diversity, Hindus are profoundly tolerant of other religions, respecting the fact that each person has his/her own  pathway to moksha. One of the unique understandings in Hinduism is as mentioned earlier - life is not about a God in remote heaven but is inside each and every jIvAtma, in the heart and consciousness, waiting to be discovered.

There is much confusion about this subject, even among Hindus. Learn the right terms and the subtle differences in them, and you can explain the profound ways Hindus look at Divinity. Others will be delighted with the richness of the Indian concepts of the divine. You may wish to mention that some Hindus believe only in the formless Absolute Reality as God; others believe in God as personal devta. This freedom makes the understanding of divine the richest in all of Earth’s existing faiths.