Good...but not Morrowind (spoilers)
However there were a few mistakes made, namely the fast-travel option. While indeed it is helpful because you can conserve your potions for when it matters, and only fight what needs to be fought, I found literally no incentive to walk and discover like I did in Morrowind. It cuts the scope of the world down immensely. Put it this way, if that game world is supposedly bigger than Morrowind's, I never saw it.
Another mistake is the storyline. While it is well presented, it doesn't have that epic feel to it. To put it simply, you become an ass-kicking, baby clannfear/scamp smashing, Daedra crushing, tomb exploring, ghost busting....bodygaurd. Martin steals all of the glory, people just know you as your standard every day hero. For some that might be enough, for me, I wanted to become a god again.
Scope of the game is something people praise often, not me. There are nowhere near as many factions as the 3rd game. I realize I keep comparing 1 to the other but that is the only way people will understand. In Morrowind you felt like you were thrown into a warring nation. Factions hated you for joining their enemies, and loved you for joining their own. The complex love/hate system was the game's highest point. In Oblivion I saw none of that. You basically have: The Theives guild, The Fighters Guild, The Mages Guild, The Dark Brotherhood (i haven't tried those quests yet but it is new at least) as your main ones. At least those are the ones I have found. The quest lines are relatively short as well.
This is not to say that there aren't highpoints to Oblivion. The combat system is amazing, swing a claymore for the first time and find yourself fearing it because it sounds so heavy. The new security system is interesting as well. It really is based completely on your skill, there is an "auto-attempt" feature but where is the fun in that? I felt like a real security master by the time i had the skill up to 100, able to pick locks with laser precision each time. There does seem to be alot of quests outside of the main quest to do, although good luck finding them all without some sort of guide. Playing the game completely on my own i doubt i have even scratched the surface of what it has to offer. I suppose thats what makes this game great, While the scope of it is not huge, there are certainly many things to keep you occupied, the only question is, will you want to find and do every single random quest?