Why can mercury oxide be decomposed into mercury and oxygen upon heating? As I am a grade 9 student, please use simple English that does not involve many technical words in Chemistry. Thank you.  

I have learnt from my teachers' handout that physical methods of separation include heating, and that a compound can only be broken down into elements by chemical methods such as electrolysis.

But why can mercury oxide (a compound) be decomposed into mercury and oxygen upon heating (physical method)?  

Or is it simply because heating is a chemical method? (that my teacher probably was mistaken)
In simple terms, heating is indeed a physical method. You might have heard of heat being, in fact, molecules/ions moving faster. There’s nothing in there per se that would make it a chemical method.

But. The atomic particles that are moving quicker can bump into each other with more energy (because they are faster — think of a car crash which is worse at high speeds); this can be understood as activation energy, i.e. energy that allows reactions to proceed.

So by adding enough heat energy, you are inducing a chemical change which leads to the (thermal) decomposition of mercury oxide into its elements.