The revelation at Mount Sinai – the central episode not only of the parshah of Yitro, but of Judaism as a whole – was unique in the religious history of mankind. Other faiths (Christianity and Islam) have claimed to be religions of revelation, but in both cases the revelation of which they spoke was to an individual (“the son of G-d”, “the prophet of G-d”). Only in Judaism was G-d’s self-disclosure not to an individual (a prophet) or a group (the elders) but to an entire nation, young and old, men, women and children, the righteous and not yet righteous alike.
From the very outset, the people of Israel knew something unprecedented had happened at Sinai. As Moses put it, forty years later:
Ask now about the former days, long before your time, from the day G-d created man on earth; ask from one end of the heavens to the other. Has anything so great as this ever happened, or has anything like it ever been heard of? Has any other people heard the voice of G-d speaking out of fire, as you have, and lived? (Deut. 4: 32-33). 
For the great Jewish thinkers of the Middle Ages, the significance was primarily epistemological. It created certainty and removed doubt. The authenticity of a revelation experienced by one person could be questioned. One witnessed by millions could not.  G-d disclosed His presence in public to remove any possible suspicion that the presence felt, and the voice heard, were not genuine.
Looking however at the history of mankind since those days, it is clear that there was another significance also – one that had to do not with religious knowledge but with politics. At Sinai a new kind of nation was being formed and a new kind of society – one that would be an antithesis of Egypt in which the few had power and the many were enslaved. At Sinai, the children of Israel ceased to be a group of individuals and became, for the first time, a body politic: a nation of citizens under the sovereignty of G-d whose written constitution was the Torah and whose mission was to be “a kingdom of priests and a holy nation.”
Even today, standard works on the history of political thought trace it back, through Marx, Rousseau and Hobbes to Plato’s Republic, Aristotle’s Politics and the Greek city state (Athens in particular) of the fourth century BCE. This is a serious error. To be sure, words like “democracy” (rule by the people) are Greek in origin. The Greeks were gifted at abstract nouns and systematic thought. However, if we look at the “birth of the modern” – at figures like Milton, Hobbes and Locke in England, and the founding fathers of America – the book with which they were in dialogue was not Plato or Aristotle but the Hebrew Bible. Hobbes quotes it 657 times in The Leviathan alone. Long before the Greek philosophers, and far more profoundly, at Mount Sinai the concept of a free society was born.
Three things about that moment were to prove crucial. The first is that long before Israel entered the land and acquired their own system of government (first by judges, later by kings), they had entered into an overarching covenant with G-d. That covenant (brit Sinai) set moral limits to the exercise of power. The code we call Torah established for the first time the primacy of right over might. Any king who behaved contrarily to Torah was acting ultra vires, and could be challenged. This is the single most important fact about biblical politics.
Democracy on the Greek model always had one fatal weakness. Alexis de Tocqueville and John Stuart Mill called it “the tyranny of the majority”. J. L. Talmon called it “totalitarian democracy.” The rule of the majority contains no guarantee of the rights of minorities. As Lord Acton rightly noted, it was this that led to the downfall of Athens: “There was no law superior to that of the state. The lawgiver was above the law.” In Judaism, by contrast, prophets were mandated to challenge the authority of the king if he acted against the terms of the Torah. Individuals were empowered to disobey illegal or immoral orders. For this alone, the covenant at Sinai deserves to be seen as the single greatest step in the long road to a free society.
The second key element lies in the prologue to the covenant. G-d tells Moses: “This is what you are to say to the house of Jacob and tell the people of Israel. ‘You yourselves have seen what I did to Egypt and how I carried you on eagles’ wings and brought you to Me. Now, if you obey Me fully and keep My covenant, you will be My treasured possession, for the whole earth is Mine. You will be for Me a kingdom of priests and a holy nation . . .’” Moses tells this to the people, who reply: “We will do everything the Lord has said.” 
What is the significance of this exchange? It means that until the people had signified their consent, the revelation could not proceed. There is no legitimate government without the consent of the governed, even if the governor is Creator of heaven and earth. I know of few more radical ideas anywhere. To be sure, there were sages in the Talmudic period who questioned whether the acceptance of the covenant at Sinai was completely free. However, at the heart of Judaism is the idea – way ahead of its time, and not always fully realised – that the free G-d desires the free worship of free human beings. G-d, said the rabbis, does not act tyrannically with His creatures. 
The third, equally ahead of its time, was that the partners to the covenant were to be “all the people” – men, women and children. This fact is emphasised later on in the Torah in the mitzvah of Hakhel, the septennial covenant renewal ceremony. The Torah states specifically that the entire people is to be gathered together for this ceremony, “men, women and children.”  A thousand years later, when Athens experimented with democracy, only a limited section of society had political rights. Women, children, slaves and foreigners were excluded. In Britain, women did not get the vote until the twentieth century. According to the sages, when G-d was about to give the Torah at Sinai, He told Moses to consult first with the women and only then with the men (“thus shall you say to the house of Jacob” – this means, the women ). The Torah, Israel’s “constitution of liberty”, includes everyone. It is the first moment, by thousands of years, that citizenship is conceived as being universal.
There is much else to be said about the political theory of the Torah (see my The Politics of Hope, The Dignity of Difference, and The Chief Rabbi’s Haggadah as well as the important works by Daniel Elazar and Michael Walzer). But one thing is clear. With the revelation at Sinai something unprecedented entered the human horizon. It would take centuries, millennia, before its full implications were understood. Abraham Lincoln said it best when he spoke of “a new nation, conceived in liberty, and dedicated to the proposition that all men are created equal.” At Sinai, the politics of freedom was born.