First, I would suggest (unless you have the GotY edition, IIRC) the latest official patch (the Shivering Isles version if you have SI, and the plain Oblivion one if you don't).
Next, get either
Oblivion Mod Manager (OBMM) and/or
Wrye Bash. Get to know how to use one or both for installing mods, at the very least. Learning how to use the Bashed Patch (with Wrye Bash) is a good idea, but you won't need to for a while, unless you choose many mods indeed, and/or multiples of certain kinds of mods in particular (e.g., overhauls).
Then, pick up the
Unofficial Oblivion Patch (as well as the latest update for this, which is - I believe - still
UOP Supplemental 3.2.6), and - if you have the relevant official "mods" - the
Unofficial Shivering Isles Patch (UISP) and
Unofficial Official Mods Patch (UOMP) as well.
Right.
Now you're ready* to actually install mods that really "do something" (other than patching obvious, objective errors in the vanilla game, that is). From here on in, it's totally a matter of taste. Get to know what you like, or might like, before adding tons of mods, is my advice. What do you think is not quite right with vanilla Oblivion? Or, possibly, dead wrong? What might you like to see added in? Removed? And so forth...
As far as *my* tastes go, I like increased "immersion" / "roleplaying", more beautiful, dark and compelling graphics, as well as a whole bunch of other things, depending how I feeel at the time. I might like to go the whole nine yards with Paladin-style (surprised?
) in which case, there might well be gameplay adjustments, quests, weapons and armour, clothing, and housing to suit. Recently, I decided to install a very particular race-adding mod (in this case, Sirens and Tritons) along with underwater houses/fortresses/ruins/quests and some other things to go with. Essentially, themes work well for me, Sometimes, I manage to fit several in the one load order, so I can successfully have several characters on the go, each extreemely different from the next, and each doing extremely different things in the same world (well, mostly in the same world... or at least,
partly so).
But some of my own staples would be:
FCOM (
OOO +
MMM +
Fran's +
WarCry + a few other things, all in one) because it suits my playstyle for the most part, and is simply awesome;
DarkUId DarN (a cross between DarkUI and DarNified UI - nearly perfect, IMO);
Atmospheric Loading Screens (suits DarkUId DarN very well, and is just... better than all other options I've seen);
Unique Landscapes (all of them, along with all required patches - they really do make Oblivion that much more interesting and beautiful);
Alternative Start Revamped (choose between the usual lead-in, a number of houses in various parts of Cyrodiil, or a couple of other options altogether - I love this one); and
LAME (or another magic system overhaul/tweak, depending - essential, IMO, as vanilla magic is exceedingly annoying, hence the name of LAME I suppose). Plus a few more, but I could go on forever.
* Actually, some other basics: Oblivion Script Extender (
OBSE) and Common Oblivion (
Cobl). Perhaps I missed a couple more...