In January 1988, the IOC and the IIHF came to an agreement that allowed players with NHL experience to compete in the Olympic Games in Calgary (and beyond). In 1988, Canada, Sweden, and Finland made use of players with NHL experience. In 1992, and 1994 there was a further increase in the number of players with NHL experience.
As part of the 1995 NHL CBA, the NHL made allowances to allow a break in the NHL schedule for the 1998 and 2002 Olympics to allow the best players in the world to compete for their countries.
The NHL has allowed it's players to participate since 1988 (part of Jim Peplinski playing for Canada in 1988), any player who wanted to play for their country was free to do so, but would not be paid by their team. No players ever took up that offer. As part of the CBA, players are now paid for that two weeks.
With respect to 2014, the NHL cannot stop it's players from playing in the Olympics, they can however decide not to shut down the season for 2-3 weeks (although there is the possibility that the European Federations stipulate this when the current transfer agreements get re-worked) which would make it difficult for players to do so..