I was just looking through the icons for fun, and noticed that all of the Xbox buttons are in there, why is this? If I plug and xbox controller in will it work that way?

Yes it will

it didnt for me.

(old thread I know but I recently got a new comp and put ob on it. lol)

I believe that what you're looking to do is to have the XBOX 360 interface for the PC version of Oblivion. Quite frankly, that isn't currently possible (and I doubt it ever will be).