This site explains the use of oil on wood fairly well:
Oil is made of molecules small enough to seep down into the wood rather than merely sit on top. As a result, oil makes wood look richer and more translucent without adding a film on the surface. There are two different types of oils that woodworkers use: drying and non-drying oils. Drying oils will change from liquid to a solid film when exposed to oxygen in the air. Nut oils (boiled linseed, tung, etc.) are drying oils, but vegetable (peanut, olive) and mineral oils are non-drying. Edible mineral oil is popular on food contact items, like cutting boards. However, non-drying oils stay wet indefinitely, and they will wash off when the board is scrubbed with soap and water. Because they do not dry to a solid film, non-drying oils are considered a wood treatment, but not a finish.