Salaam Munir rana,
As usual, I give you Muhammad Asad's explanation of the verse in question, as I am not well-versed in the Quran. Forgive me, in advance, if my continuatious quoting of Muhammad Asad is not to your pleasing and falls short of anwering your inquiries. But before I cite you his explanation of the verse in question, I feel it is appropriate to first cite you verse 2:106 and his explanation of it. That said, below is his translations and explanation of 2:106:
2:106
Any message which, We annul or consign to oblivion We replace with a better or a similar ones. Dost thou not know that God has the power to will anything?
The principle laid down in this passage - relating to the supersession of the Biblical
dispensation by that of the Qur'an - has given rise to an erroneous interpretation by many
Muslim theologians. The word ayah ("message") occurring in this, context is also used to
denote a "verse;" of the Qur'an (because every one of these verses contains a message).
Taking this restricted meaning of the term ayah, some scholars conclude from the above passage
that certain verses of the Qur'an have been "abrogated" by God's command before the
revelation of the Qur'an was completed. Apart from the fancifulness of this assertion -
which calls to mind the image of a human author correcting, on second thought, the proofs
of his manuscript - deleting one passage and replacing it with another - there does not
exist a single reliable Tradition to the effect that the Prophet ever, declared a verse of
the Qur'an to have been "abrogated". At the root of the so-called "doctrine of abrogation"
may lie the inability of some of the early commentators to reconcile one Qur'anic passage
with another: a difficulty which was overcome by declaring that one of the verses in
question had been "abrogated". This arbitrary procedure explains also why there is no
unanimity whatsoever among the upholders of the "doctrine of abrogation" as to which, and
how many, Qur'an verses have been affected by it; and, furthermore, as to whether this
alleged abrogation implies a total elimination of the verse in question from the context
of the Qur'an, or only a cancellation of the specific ordinance or statement contained in it.
In short, the "doctrine of abrogation" has no basis whatever in historical fact, and must
be rejected. On the other hand, the apparent difficulty in interpreting the above Qur'anic
passage disappears immediately if the term ayah is understoood, correctly, as "message",
and if we read this verse in conjunction with the preceding one, which states that the Jews
and the Christians refuse to accept any revelation which might supersede that of the Bible:
for, if read in this way, the abrogation relates to the earlier divine messages and not to
any part of the Qur'an itself.
With that out of the way, below is his translation and explanation of 16:101:
16:101
And now that We replace one message by another [125] - since God is fully aware of what He bestows from on high, step by step [126] - they [who deny the truth] are wont to say, "Thou but inventest it!" Nay, but most of them do not understand it!127
[125] By substituting the message of the Qur'an for the earlier dispensations - and not, as
some Muslim scholars maintain, "abrogating" one Qur'anic verse and replacing it by another.
[126] The gradualness of revelation (implied in the verbal form yunazzil) corresponds to God's
plan, according to which He has gradually unfolded His will to man, substituting one dispensation
for another in the measure of mankind's intellectual and social development, bringing it to its
culmination in the message of the Qur'an.
As always, I hope that helps and peace to you.