Over time, oil breaks down. There are many factors that contribute to the breakdown of the oil in your engine, but heat is the biggest contributing factor. In addition to the breakdown of the oil itself, there are also additives that are put in engine oil. These begin to break down and lose their effectiveness over time. There is also the issue of contamination. Small bits of dust, dirt and debris get into your engine and make their way into the oil. All these little bits of "stuff" make the oil much less slippery and much less effective at cushioning the moving parts of the engine.
The oil has two jobs in the engine. One is to reduce the amount of friction by putting a layer of oil between the moving parts and the other is to help cool the parts of the engine as it circulates through.