My friend told me that graphics mods are a must for Oblivion.

So, what's the best one? Qarl's Texture Pack III?

Any other info? thanks

I think All Natural improves the "graphics" in another way that is really nice. You can also tweak it to your own liking.
TOTO (google it) also has a number of links to other retextures. QTP3 doesn't retexture everything, and if it's too taxing on your system, there are also other good alternatives (Bromret's normals + Vibrant textures is a popular one).

I've also made a few retexture mods for specific things that have been left out by QTP3.
For instance...
Fires: http://www.tesnexus.com/downloads/file.php?id=38061
Skulls & Ironwork: http://www.tesnexus.com/downloads/file.php?id=36075

Also... how could I forget, lolz. Oblivion Graphics Extender (OBGE). It has a bunch of shaders that you can use. Some alter brightness, gamma, contrast etc... some add SSAO, some add blur...
It's really good and you can get some nice effects from it.
There's also the mod Liquid Water, which is absolutely amazing. It's a WIP, but has come very far. Be sure to check it out its progress if you want your water to look amazing.

There is also this one from Brittainy

http://www.tesnexus.com/downloads/file.php?id=37336

If you want to use this one then i would advice to download "Lush and Gaudy Landscape and Grass and Tree Mod v1_4 BAIN". It makes installing it with the BAIN wizard pretty easy when you have Wrye bash installed. And another tip...you might want to use it together with this one, makes the game world look really good.

http://www.tesnexus.com/downloads/file.php?id=38204