Oblivion is the fourth game in the long running Elder Scrolls series of games. It all started a hundred years ago with Arena, a game that was so buggy it was unplayable. It continued with Daggerfall, which is the biggest game ever made (probably) but it was still very buggy. Along came Morrowind, a step back according to many, as it was smaller, less fun and still pretty buggy.
Oblivion, however, is actually rather stable. It improves on Morrowind on many levels, but it still falls short compared to Daggerfall on others. Graphically it's unsurpasses. Havok physics makes combat (even though it is highly twitch based) very enjoyable. Viewing distance has increased tenfold since Morrowind and the game is still as open ended as you've come to expect from an Elder Scrolls game. There's lots to do, plenty to see, hordes of people to meet and armies of monsters to defeat.
The only apparent flaws of the game is that the quests are strictly linear, meaning that they always start and end the same way. There are no alternatives or options. Another flaw lies in the design of the difficulty scaling: because the game scales the entire world after your character's level, the leveling up can seem like an unnecessary thing to do because everything in the world levels with you, thus removing the feeling of accomplishment. your character almost never gets stronger relative your opponents. Scaling also upsets the economy further into the game.
Aside from those flaws, none of which are game breaking, Oblivion is a fantastic game and experience. You'll marvel at the environments, get lost in the faction quests, fight unbelievably monsters and travel to hell and back (literally). Oblivion is definitely an experience you don't want to miss out on.