Morrowind is a deeper, much more unforgiving (and thus realistic) RPG than Oblivion. Oblivion pretty much held your hand throughout the entire game. The game made sure that your enemies were always on par with you, that you couldn't lose items critical to a mission, and prevented you from killing NPCs that were critical to missions in the game. And of course Oblivion also let you warp to anywhere in the world as long as you had been there already. This is not the case in Morrowind. In Morrowind nothing is set to your level. The consequence of that is that it is more than possible for you to run into an enemy that you have no chance in hell of beating because they're 15 levels above your own and decked out in top tier gear. But it also means that if you know where to go you could end up with the best stuff in the game at level 2 (though you'll have a hell of time doing it), and while it is true that after a certain point in the game your character will become god-like in power that at least gives you a sense of accomplishment and progress. In Morrowind you start out getting your ass kicked by everything in the game (even the mud crabs and rats are a challenge) and by the end of it nothing can scratch you. Contrast that to Oblivion where you start out being able to hold your own in a fight and end the game at the same relative power level you were when you started.
Like I was saying though, Morrowind is a very open game. It does let you do just about anything you want even if that means breaking the game (you can kill any NPC in the game, even if doing so will prevent you from being able to complete the main quest, whereas in Oblivion important NPCs would just go unconcious for a minute or two). You have to walk everywhere (there are fast travel routes and warp spells, but you're still usually limited to fast traveling between major towns only).
The game is also a lot deeper. Did you ever find it odd that in Oblivion axes were considered blunt weapons? Morrowind doesn't have such a simplistic weapons grouping system. Whereas in Oblivion you had four weapons groups (ranged, staves, blunt, and sharp), in Morrowind there were several specific groups (daggers, swords, axes, hammers, bows, staves, and that's all I can remember at the moment). Armor is also more indepth. In Oblivion all you got was helms, shields, chest pieces, gloves, boots,greaves and jewlers. Those same armor pieces are in Morrowind except that there are seperate gauntlets for your left and right hands, same goes for boots and pauldrons (which were completely ignored in Oblivion and just attached by default to whatever chest piece you found). Merchants didn't have an infinite supply of money. Joining a faction/guild actually had consequences with the other factions in the game (join one faction and another may not let you join while one that you were already in may decide to kick you out. Likewise members of another faction may like you more, and some factions may hate you so much that they'll try to kill you). One of the biggest differences in depth though is that Morrowind actually made you do the quests yourself. The annoying thing about Oblivion (and probably it's worst offense of hand holding) was that the map marker always told you where you had to go to finish the quest. If you had to find an item in Oblivion it was no harder than just walking over to the green arrow on the map. Morrowind, however, is exactly the opposite. It usually gives you some vague directions and instructions and you're then left to figure out the rest. When Morrowind makes you search for an item you actually need to search for it and keep an eye open for small details. Granted for some players this is too much and causes them to be so frustrated that they stop playing though other players love it.
Probably the best thing about Morrowind in comparison to Oblivion though (and really the rest of the TES series) is that everything in Morrowind was hand placed by the developers and not randomly generated. So treasure hunting in the game is actually exciting because there are a lot of unique stuff to find, and some of it is hidden in the world and not in loot boxes and corpses (for example the two best gauntlets in the game are found laying inside an empty minecart deep inside a cave and are very easily passed over if you don't pay close attention to your surroundings).
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