I downloaded OOO and installed it on oblivion and wanted to know. How do i tell if it was installed properly ?

Start a new game. The guard captain that comes into the cell should have fancy armor.

So i need to start a new game ?

That's the fastest way to tell.

In an ongoing game, you'd have to wait three days for items/NPCs to respawn to see the differences there.

You should immediately get an item called a "Torch Hot Key" in your inventory. That will tell you the mod is installed and running. If the icon is present, then it should all be installed correctly.

Also look at your potion bottles. They have lots of different colours. No you don't need a new game.

If not starting a new game, make sure you update NPC levels through Wrye Bash.

The potion bottles are the same color as they always are.

You maybe right but when you when you start making potions and depend on what effect or what the potion dose like for example restore magika (spelling) your magika bar blue you will be getting a blue bottle instead of pink.
Restore health red bar it will be a red bottle instead of pink.

What about the Torch Hot Key?

Not there. sorry for not replying quicker i got busy doing the rest of the DB quest line.

Make sure the Oscuro's Oblivion Overhaul.ESM and Oscuro's Oblivion Overhaul.esp are both in your data folder and checked as active.

Check to be sure you don't have a folder called Oscuro's Oblivion Overhaul containing all the meshes and textures in your data folder.