Aircraft engines are either dry sump or wet sump, which means nothing more than the oil is kept either in a separate tank apart from the engine or integrated and below the engine, respectively. Regardless of the type of system, the oil pump draws oil from the sump through the engine, and then either gravity or another pump takes it back to the sump. That’s the simple version.
The actual system is a bit more complex, because we need a way to filter the contaminants and cool the oil. The order can vary, but typically the oil is drawn up through a screen that filters out bigger metal particles. Some engines also have oil filters like a car, which filters even smaller particles. Then it might go through an oil cooler, which is a series of tubes and a broad flat area exposed to the cooling air that comes into the cowling. Then it goes back into the engine to lubricate and cool the components. Finally, it drips or is drawn back into the sump to start the process over again.
Without sophisticated computer-controlled operation and diagnostics, aviation mechanics rely on clues to help solve maintenance issues. Oil is one of the biggest sources of diagnostic information available to them. By noting how much oil is being lost over time, carefully inspecting the filter and screen, and sending the oil off for a metallurgy analysis, a mechanic can tell if an engine is starting to “make metal,” which can indicate a larger problem.