There are several philosophical interpretations of Nietzsche's statement that "God is dead." Nietzsche's notion of a god symbolizes how the universe was thought to operate before the Enlightenment Period. A benevolent or not so benevolent god or gods determined the physical laws of the universe. Within this universe sat humankind. Humans were directed by the actions of the god(s) with little or no regard for free will or choice. After the Enlightenment Period, science superseded god(s). Humans no longer had to believe their destiny was beyond their control, and reason replaced myth, freeing humankind to choose rational thought and intellect over the whims of superior eternal beings. God's death then is a symbolic representation of humankind's search for understanding outside of the religious realm. Myth is replaced by the perfected world of analytical, empirical knowledge, or rational science.
However, that did not preclude religious belief as an essential component in society, as some have interpreted this quote as suggesting. In Twilight of the Idols and other writings, Nietzsche suggested that religious doctrine provides a moral and ethical structure for humankind. Total secularization of thought is antithetical to humanity finding meaning in the world. While it is true that laws regulate human conduct, laws cannot entirely determine how humans interact, nor can they fulfill humans' deeper need for meaning. Indeed, religious belief in God is where many humans may find meaning and purpose for living. Nietzsche thus is not suggesting that individuals pursue a care-free life, favoring happiness over duty—a position often attributed to relativism.
This is, of course, only one of several interpretations. It reminds us that we should read Nietzsche, and for that matter, all philosophers in context of all their writings.