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Let's say that your engine has plenty of oil, but you never change it. Two things will definitely happen:

Grime will accumulate in the oil. The filter will remove the grime for a while, but eventually the filter will clog and the dirty oil will automatically bypass the filter through a relief valve. Grimey oil is thick and abrasive, so it causes more wear.

Additives in the oil like detergents, dispersants, rust-fighters and friction reducers will wear out, so the oil won't lubricate as well as it should.

Eventually, as the oil gets dirtier, it will stop lubricating and the engine will quickly wear and fail. Don't worry, this isn't going to happen if you forget to change your oil one month and it goes over the recommended change interval by 500 miles. You would have to run the same oil through the engine for a long time -- many thousands of miles -- before it caused catastrophic failure.

The viscosity grade (for example, 5W-30) tells you the oil's thickness, or viscosity. A thin oil has a lower number and flows more easily, while thick oils have a higher number and are more resistant to flow. Water has a very low viscosity -- it is thin and flows easily. Honey has a very high viscosity -- it is thick and gooey.

The standard unit used to measure viscosity is the centistoke (cSt). According to the Automotive and Industrial Lubricants Glossary of Terms:

Viscosity is ordinarily expressed in terms of the time required for a st­andard quantity of the fluid at a certain temperature to flow through a standard orifice. The higher the value, the more viscous the fluid. Since viscosity varies inversely with temperature, its value is meaningless unless accompanied by the temperature at which it is determined. With petroleum oils, viscosity is now commonly reported in centistokes (cSt), measured at either 40°C or 100 °C (ASTM Method D445 - Kinematic Viscosity).

Multi-weight oils (such as 10W-30) are a new invention made possible by adding polymers to oil. The polymers allow the oil to have different weights at different temperatures. The first number indicates the viscosity of the oil at a cold temperature, while the second number indicates the viscosity at operating temperature. This page from the Sci. Electronics. Repair FAQ offers the following very interesting description of how the polymers work:

At cold temperatures, the polymers are coiled up and allow the oil to flow as their low numbers indicate. As the oil warms up, the polymers begin to unwind into long chains that prevent the oil from thinning as much as it normally would. The result is that at 100 degrees C, the oil has thinned only as much as the higher viscosity number indicates. Another way of looking at multi-vis oils is to think of a 20W-50 as a 20 weight oil that will not thin more than a 50 weight would when hot.

Oil lubricates the moving parts of your engine. It keeps them cool by lowering friction and carrying heat away. It also keeps any grit or tiny particles from scratching tightly-fitted parts.

Heat breaks down oil. It can make the oil gummy or watery (or both), so that it doesn't lubricate properly. And the longer it's in the engine, the grimeier it gets.

Replacing old oil with new oil fixes all these problems. The fresh oil lubricates and cools better. When you flush the old oil out, you also flush away any grit or grime in it.

Getting your oil changed regularly is probably the single best thing you can do for your engine. To reduce repairs and improve performance, follow your manufacturer's oil change recommendations listed in your owner's manual.

Regular motor oil is made from crude oil. This kind of oil has been used for more than 100 years to lubricate engines. It does the job well. It breaks down over time, but not too quickly.

Synthetic oil starts out as regular oil. Then it's modified to lubricate even better and stands up to high heat better without turning into gel or getting watery. Some blends of synthetic oil are designed to keep high-mileage vehicles rolling longer. Others are meant for high-performance engines. Still others can help to improve your car's fuel mileage.

Sources: http://auto.howstuffworks.com/car-driving-safety/safety-regulatory-devices/never-changed-oil.htm