How did magic affect ghosts in Oblivion?
In Oblivion and Morrowind, spells and enchanted weapons did their normal damage to ghosts, wraiths, wisps, and other ethereal enemies. So did Daedric and Silver weapons. Unenchanted weapons simply did nothing to ethereal creatures. Making your first level warrior armed with an iron sword helpless if he walked into a dungeon filled with ghosts (been there, done that in both Morrowind and Oblivion).
One of the big differences with Oblivion is that Silver was a regular weapon class (like Dwarven, Elven, Ebony, etc...). It was not like in Skyrim, where they are just a curiosity weapon only used by that werewolf hunter faction. So there were a lot of silver weapons in Oblivion if you were at the right level.