Poly(ethylene oxide) (PEO) has unlimited solubility in water at physiological temperatures over a wide range of polymer molecular weights but phase separates from aqueous solution with increasing temperature at a lower critical solution temperature (LCST). We examine the potential origins of this LCST behavior by applying recent advances in information theory modeling of hydrophobic hydration, supported by molecular simulation, and the Flory-Huggins theory of polymer solutions. We find that attractive interactions between PEO monomers and water provide the driving force for the unlimited mutual solubility at ambient temperatures. However, it is the intrinsic hydrophobicity of the PEO monomer that drives phase separation with increasing temperature. We also calculate the local densities of water oxygens and hydrogens around the ether oxygen and the carbon groups of the PEO monomer. Water structure around the carbons is found to be essentially equivalent to that for methane in water, while water structure around the ether oxygen resembles the structural features of water-water hydrogen bonding in pure liquid water. Although the latter points to water hydrogen bonding to the ether oxygen, our calculations show that attractive electrostatic interactions make a less-substantial contribution to the free energy of hydration of PEO compared to attractive dispersion interactions.