I gather the author is UK based and working for a UK company. I imagine 'misunderstand' might be a polite way of saying 'we realised that our decision has caused a lot of negative publicity and we are changing our mind'. That is how it works in organisations I have worked for in the past. Or then again, the author could literally have mistaken what the manager said.

The employer probably wanted to talk to him about it, to decide whether there really was enough similar tech (or even shared code) that it might harm the company. That's basic due diligence.

Probably after going over it, they determined that it would present no harm. Notice that this was not a legal process, just an employer and developer communicating.

It wouldn't always be that clear cut. His employer's policy might be something like "outside projects are allowed as long as you don't use knowledge that you gained from working there".

That could easily be interpreted more broadly than it was intended. He could interpret it as "I learned Javascript while working there, so I can't release a project in Javascript" or something like that, when they really intended it to prevent use of non-publicly available information related to their business.

Well, what it means is he thought that he couldn't, but then he found out that his understanding was wrong, and he actually could.