The standard petroleum oil used in automobiles begins to break down the moment the engine is run. The quality of the oil and the additives within it help to keep the rate of that breakdown within an acceptable limit. Despite this, oil will eventually break down past the allowable limits, which is why oil changes are recommended at specific intervals. When the oil is not changed at the recommended intervals, serious problems can result.
Oil that is allowed to remain in an engine past its recommended change period breaks down. As the oil breaks down it loses its ability to properly lubricate the moving parts of the engine, and wear on those parts accelerates. As the oil breaks down further, the wear occurs even faster, greatly shortening the overall life of the engine.
As oil breaks down, the chemicals contained within engine oil react with oxygen and heat forming acids and corrosive compounds. These compounds react with the metals inside the engine and cause increased wear. These compounds also create sludge and varnish buildup on internal engine parts and interferes with critical clearances between internal moving parts. This leads to increased oil consumption, sticking valves and seized pistons, as noted in Amsoil: "Oxidization and Deposits."
Oil that is not changed frequently breaks down and leaves carbon deposits and sludge that can clog the oil pump pickup screen and oil passageways, which will cause the oil pressure to drop, and less oil to be supplied to the engine. This can lead to engine damage if buildup becomes thick enough to choke off oil flow to the engine. Offroad Outdoors: "Motor Oil Breakdown Causes" provides a detailed description of this process.
Carbon deposits that are created from the breakdown of oil can clog the Positive Crankcase Ventilation (PCV) valve, the Exhaust Gas Recirculation (EGR) valve, and lead to the engine running roughly and hotter. This accelerates the rate of wear on internal moving parts and increases exhaust emissions. This can also lead to the engine performing sluggishly, and a decrease in overall engine power.
Motor oil experiences "Thermal Breakdown," which is the process where the heat of the engine weakens the viscosity, or thickness of the oil. Engine oil that is past its serviceable life cannot maintain an adequate viscosity, and continues to degrade. The oil can no longer properly cushion the internal moving parts of the engine. As the wear increases and the oil thins further it slips past seals and rings and gets burned in the combustion chamber, leading to smoke coming from the exhaust, and increased oil consumption.