Creating your Character
Character creation is always a huge part of any RPG, and Oblivion is no exception. A lot of the game is amorphous, very few things are locked down to a stereotype.
Attributes
Since leveling levels every monster with you then getting the most attributes out of every level. You can gain attribute bonuses by training corresponding skills. More details on the Attributes Page.
Races
Bretons and High Elves are the champions of magic, but you could turn one into a fighter with a little extra effort. Redguards and Orcs are the combat specialists. Khajiits and Wood Elves are natural thieves. Argonians can swim any distance underwater (useful for treasure hunting). Imperials are the most balanced race, as other than a slight combat leaning they're pretty much mediocre at everything. More details on the Races Page.
Signs
Emperor Septim will ask you near the end of the tutortial which sign you were born under. This is largely insignificant, but you can grab a bonus to attributes like Strength and Endurance.
Class
Oblivion has 21 pre defined template classes. You could go with any one of those, but many of them have a weakness or repeated skill you don't want. Because of this Bethesda gave you the option of creating your own custom class. You can pick your own attribute bonuses, main skills, and name. More details on the Class Page.
Skills
The most influencial things you'll actually noticer in oblivion are skills. There are 17 skills all on a scale of 1 to 100. Every 25 points a drastic increase in abilities occurs. Skills are mostly gained by using it over and over. Skills come in minor and major and major skills are the cause of leveling up. More details on the Skills Page.