I've been taken to this passage (Mark 10, Matthew 19, Luke 18) recently by those who want to 1) deny the deity of Christ and 2) teach a faith plus works salvation.

In this passage Jesus was teaching a very important lesson.  He was addressing this mans preconceived idea that good people inherit eternal life and that people are good because of the good they've done.

Jesus knew this man's heart, as soon as the man called Jesus good, Jesus addressed this mans presupposition that people are good.  Jesus responds that no one is good, except God. (Romans 3:10)  Next the man asks the best question you could ever ask of Christ, "How do I inherit eternal life?".  Jesus responds by saying that he knows the commandments, and lists some of them.  As we'll see, He said this to teach a valuable lesson.  The man responds that he has kept the commandments since he was a small child.  Again we see that this man has a faulty view of what good is, Jesus presents him with the yard-stick, the standard that God has given to show us our sin, but this man cannot see.  

Jesus continues His lesson with a test.  The man claims he has kept the commandments, so Jesus starts with the first commandment --  Thou shalt have no other gods before me.  To show the man he has broken the first commandment Jesus tells him to give his riches to the poor and follow Him.  And the truth is exposed; this man's riches were his god and he could not part from them.  

Now Jesus is not saying that every Christian needs to sell all they have, He was teaching a lesson that this man was in fact not keeping the commandments as he thought, he was not good, and his works could not save him because he was a law breaker.  (Romans 3:23)

Now to address those who use this passage for another purpose.

First, the Muslim I was talking with indicated that when Jesus said "Why do you call Me good?  No one is good except God alone" that Christ was admitting that he was not God.  But Jesus is not teaching here that He is God incarnate, He is teaching this man and others around a valuable lesson.  In fact this statement shows us that Jesus was God since He never sinned (Hebrews 4:15), something that only God in the flesh could do.

Second, Roman Catholics who use this verse to teach that it is overwhelmingly clear that Jesus taught that works were required for salvation are missing the point of the encounter.  They are also missing the entire message of scripture that the law does not justify, rather it shows us our sin (Galatians 3:24).  Like a mirror shows our imperfections or our hair out of place, the law shows us that we are imperfect.  The mirror does not fix our hair or adjust our clothes, just like the law does not justify us.  Only Christ can justify and it is not merited by any good things we have done. 

Romans 3:20 "by the works of the Law no flesh will be justified in His sight; for through the Law comes the knowledge of sin."