Updated: May 11, 2020
As it is December, believers turn their thoughts to the Christmas season and the Biblical and theological meaning of the Incarnation and the virgin birth. The secularists, atheists, and skeptics, and even Muslims will be busy attacking the Christian faith, even though Islam agrees that Jesus was born of the virgin Mary (Qur’an, Surah 3:45-48; 19:19-21), Islam denies the Incarnation, that Jesus pre-existed, is eternal, that He is the eternal Son and eternal Word of God, and that the Word became flesh (John 1:1-5; John 1:14; Philippians 2:5-8). Although the Qur’an calls Jesus “the Word of God” (Kalimat’Allah, کلمه الله ; based on the phrase, “a word from him”, (Surah 4:171) – even though the Qur’an calls Jesus “the Word”, it denies that the Word is God by nature/substance. Muslim theology interprets that phrase as pointing to the command that Allah gave, “Be! and it happened”.
This article on the significance of the virgin birth, by Andreas Köstenberger and Alexander Stewart, is very good. I went to seminary with Andreas at CIU (Columbia International University, Columbia, South Carolina), and I had Hebrew class with him; and I remember him getting perfect scores in Hebrew – he went on to get his Phd. and be one of the top scholars of today. Praise God for him!
Studying the significance of the virgin birth is part of being equipped in sound doctrine and the missionary task of evangelism, apologetics, and making disciples. (Matthew 28:19; Jude 3; 1 Peter 3:15)
Read the whole article, but this part was especially good:
Was It Necessary?
So why is the virgin birth theologically important? John Frame helpfully summarizes the main reasons:
The virgin birth is doctrinally important because of: (1) The doctrine of Scripture. If Scripture errs here, then why should we trust its claims about other supernatural events, such as the resurrection? (2) The deity of Christ. While we cannot say dogmatically that God could enter the world only through a virgin birth, surely the incarnation is a supernatural event if it is anything. To eliminate the supernatural from this event is inevitably to compromise the divine dimension of it. (3) The humanity of Christ. This was the important thing to Ignatius and the second century fathers. Jesus was really born; he really became one of us. (4) The sinlessness of Christ. If he were born of two human parents, it is very difficult to conceive how he could have been exempted from the guilt of Adam’s sin and become a new head to the human race. And it would seem only an arbitrary act of God that Jesus could be born without a sinful nature. Yet Jesus’ sinlessness as the new head of the human race and as the atoning lamb of God is absolutely vital to our salvation (Rom. 5:18–19; 2 Cor. 5:21; Heb. 4:15; 7:26; 1 Pet. 2:22–24). (5) The nature of grace. The birth of Christ, in which the initiative and power are all of God, is an apt picture of God’s saving grace in general of which it is a part. It teaches us that salvation is by God’s act, not our human effort. 
Viewing the virgin birth as part of God’s initiative in salvation reminds us to cast it in a long line of supernatural births. Reflecting upon our discussion of the “seed of the woman” from Genesis 3:15 in the last chapter, we see that barrenness and other obstacles constantly threatened the progression of the seed and that God often intervened supernaturally to ensure the seed’s survival. (Sarah’s conception of Isaac and Rebecca’s conception of Jacob and Esau come immediately to mind.)
Jesus’s virgin birth thus represents the final and most supernatural birth in the succession of births in fulfillment of God’s promise immediately following the fall in the book of Genesis (Genesis 3:15).
Is It a Legitimate Fulfillment of Prophecy?
Moving from a theological to a historical question requires a closer look at the original context of Isaiah’s reference to the virgin conceiving a son in Isaiah 7:14.
Between 740 and 732 BC, Syria and Israel tried to force king Ahaz of Judah to join their military coalition against Assyria. When he refused to join their alliance, they invaded with the intention of deposing him and setting up a king in Judah who would join their side. Rather than trusting God, Ahaz appealed to Assyria for help. Assyria did help but at a very high cost: in essence, Judah became a vassal state of Assyria and was forced to pay heavy tribute. This series of events is known as the Syro-Ephraimite War.
In the midst of this crisis, the prophet Isaiah came to King Ahaz with a word of encouragement and an invitation to trust God: “Be careful, be quiet, do not fear, and do not let your heart be faint. . . . It shall not stand, and it shall not come to pass. . . . If you are not firm in faith, you will not be firm at all” (Isaiah 7:4a, 7b, 9b).
Ahaz, however, doubted God and did not think God would deliver. In Ahaz’s mind, his only hope was Assyria. Ahaz refused to trust God or receive a sign of God’s commitment to rescue, and Isaiah responded:
Therefore the Lord himself will give you a sign. Behold the virgin [‘almah] shall conceive and bear a son, and shall call his name Immanuel. He shall eat curds and honey when he knows how to refuse the evil and choose the good. For before the boy knows how to refuse the evil and choose the good, the land whose two kings you dread will be deserted. (Isaiah 7:14–16)
God’s sign to Ahaz in Isaiah 7:14 likely had an immediate fulfillment that directly related to the original historical situation in the Syro-Ephraimite War. The Hebrew word translated “virgin,” ‘almah, denotes a young woman who in most contexts in the Old Testament was also an unmarried virgin.  The young woman could have been a member of the royal family but was more likely the “prophetess” of Isaiah 8:3. Given the flow of the narrative, Isaiah’s own son probably fulfilled the prophecy. The parents might easily have given the child two names, particularly when they chose the names symbolically as signs or portents.
Pointing to Jesus
How does a historical fulfillment of the prophecy in Isaiah’s day relate to Matthew’s use of Isaiah 7:14 in Matthew 1:23 to refer to Jesus?
To answer this question, it is important to look at the birth of one more child in the context following Isaiah 7. Isaiah 9:1-7 is linked to the prior prophecies by reference to the birth of a son, but unlike the previous passages, the description of the child here easily and quickly leads to a picture of one who is more than human and will accomplish a deliverance that extends far beyond the original historical context of the Syro-Ephraimite War.
Significantly, the translators of the Hebrew Old Testament into Greek in the Intertestamental period translated the Hebrew word ‘almah with the Greek word parthenos, a much more specific term for “virgin.” This may indicate that even before Jesus was born, Jewish readers viewed the prophecy in Isaiah 7:14 in light of Isaiah 9:1–7 and thought that the birth of the promised child would be supernaturally accomplished “in the latter time.” Matthew clearly knew the further prophecy in Isaiah 9:1–7, because he later invoked part of this passage to describe Jesus’s ministry in Galilee in Matthew 4:15-16.
All of this leads us to interpret Isaiah’s reference to the virgin conceiving a child in terms of double fulfillment. The prophecy makes complete sense in its original historical context, but other factors within the context—the name Immanuel and the description of the child in Isaiah 9:6–7—also point forward in time to the birth of another child.
Jesus was the true and final embodiment of Immanuel, “God with us,” the one who would sit “on the throne of David and over his kingdom, to establish it and uphold it with justice and with righteousness from this time forth and forevermore.”
Andreas Köstenberger and Alexander Stewart (see the link for details on these authors)