Oblivion is still a great game, but it does have its fair share of issues.
Trying not to spoil anything, the main plotline goes in an interesting direction, though I think they might have missed their mark with it.
Gameplay-wise, going from Morrowind to Oblivion, a lot of mechanics have been simplified, for better or worse is subjective in some instances I feel. For example, several actions such as combat and spellcasting no longer operate under RNG, so you don't miss point-blank strikes on enenies and cannot fail to cast a spell. Combat in general can get a bit monotonous, as spellcasting is pretty still pretty tedious if you focus on several types of spells. Melee combat is largely just pressing attack until the enemy stops moving, but since enemies scale to your level, it's always a bit of a chore to kill anything.
Yeah, level scaling. This is one of the largest problems in Oblivion. In an attempt to make the game stay balanced regardless of where you were, they inadvertently created a large imbalance. This is because the way enemies scale isn't related to how your skills or attributes grow, but your overall level. For (a personal) example, if you're an Acrobat and you end up leveling Sneak to 100 at the very start of the game and expend your level ups without multipliers, the gap between you and your enemies grows significantly in their favor. You might find bandits wearing Elven or Glass equipment while you're stuck with your tutorial area dagger and dying from one hit. You end up having to plan how and when to level up to avoid this issue.
Another commonly criticised problem is that a lot of dungeons and caverns were actually automatically generated, making several areas look almost -- if not completely -- identical to each other.
The game is also extremely buggy, but that's not news. You might want to save often though, since Oblivion likes to crash with no warning sometimes. Usually the only "warning" it might give is a sudden drop in frames which usually indicates that a crash to desktop is not far away.
Before I finish this ranty review, I have to add that the Shivering Isles expansion is my favorite Elder Scrolls expansion out of all of them. The new strange world you have to explore and the antics of Sheogorath are great fun.
Not sure how well this conveys it, but I still consider Oblivion to be a great game. I was able to ignore the issues I had and greatly enjoy the game through several playthroughs.