The incident occurs when Curley's wife, always vying for male attention, hits on Lennie and starts to flirt with him by entering through his sad feelings toward a puppy that he had just accidentally killed for petting it too hard.
Lennie is a huge man with very strong movements and reactions; he does not know to what extent he can actually hurt something. Yet, he manages to always end up ruining whatever he touches with any degree of passion.
In this case, however, Curley's wife initiated the situation by talking non stop to Lennie about her hair, her marriage, and her failed acting career.
Take Curley. His hair is jus’ like wire. But mine is soft and fine. ‘Course I brush it a lot. That makes it fine. Here—feel right here.” She took Lennie’s hand and put it on her head. “Feel right aroun’ there an’ see how soft it is.” Lennie’s big fingers fell to stroking her hair.
When Lennie starts stroking her hair, it is clear that he gets aroused. The best guess is that he gets sexually aroused by Curley's wife, which is something he is not exempt of merely for being a mentally decelerated man.
Lennie said, “Oh! That’s nice,” and he stroked harder. “Oh, that’s nice.”
This is when four things happen that are very familiar to Lennie. First, his unintended victim freaks out and panics. Second, this said victim would scream or cry, or get loud. Curley's wife gets really loud and starts to yell.
“Look out, now, you’ll muss it.” And then she cried angrily, “You stop it now, you’ll mess it all up.” She jerked her head sideways, and Lennie’s fingers closed on her hair and hung on. “Let go,” she cried. “You let go!”
Third, Lennie freaks out and panics.
Lennie was in a panic. His face was contorted. She screamed then, and Lennie’s other hand closed over her mouth and nose. “Please don’t,” he begged. “Oh! Please don’t do that. George’ll be mad.”
Fourth, Lennie's emotions make him hold on tighter to whatever it is that he is holding, and ends up smothering or killing it, breaking it, or messing it up altogether.
He shook her then, and he was angry with her. “Don’t you go yellin’,” he said, and he shook her; and her body flopped like a fish. And then she was still, for Lennie had broken her neck.
This is exactly what happened with Curley's wife as the text shows. He starts by innocently doing what she is asking him to do, and then his natural instincts take over, along with the superhuman strength that Lennie uses to compensate for his lack of intellect and cognitive ability. This is essentially why he is unable to let go when it is brutally obvious that he should and that he must.