Oil compressor: Air compressors draw air in with a piston. The air is then compressed into a storage tank. For maximum efficiency, the piston chamber needs adequate lubrication, for which oil is used. These are oil air compressors.
Oil lubricated air compressors are more expensive & heavier but are much quieter & last several times longer.
Oil-free compressor: In oil-free compressors, the cylinder is pre-lubricated (mostly with Teflon) for permanent lubrication. The Teflon coating protects the pump. That's a major difference. While oil compressors need regular oiling, the latter doesn't require any lubrication.
An oil-free compressor is less expensive, lighter in weight, produce as much airflow (CFM) & pressure (psi) as many oils lubricated models.