If oblivion looked like skyrim it would be better.
Are we really breaking it down now so that graphics decides a better game?
But more to the point, Oblivion to me is more immersive, which makes it a better game. In Oblivion NPCs have complex schedules, guilds have better stories/actually mean something, and a lot of other things, both big and small, that make Oblivion better IMO.
Have you ever seen an NPC in Skyrim make trips to another hold that was not part of a script for a quest?