The most powerful lens of the light microscope is the 100x oil immersion objective. Because light is refracted every time it passes through a medium with a different refractive index, (air to glass or vice versa) the quality of the image is reduced with each passage. Thus, by reducing the number of such passages to a minimum, the clarity, brilliance and resolving power is preserved.
So the oil you are using is to help redirect the refracted light get to your viewing eyepiece so that you can view your speciments at that magnification.