1. A fluid that is used as a lubricant must resist both normal-force squeez-out and shearing, such as in a slider bearing (piston/ring/liner) or as in a journal/bearing, which is why one of the qualifications of an oil is that it have viscosity, or a resistance to squeeze-out and shear. Some oils do that better than others.
2. Wetting of the surfaces. This means that an oil has to have the correct surface tension. You don't want a fluid that turns into isolated globules.
3. Protection of the metal from rust and corrosion.
4. Decent cooling ability.
As labman said, additives enhance the base fluid to produce a fully formulated oil. The additives are ususally organic chemistries that mix with oil and provide increased friction reduction, metal protection from rust and corrosion, reduce oxidation of the base oil, extend temperature limits of the base oil, Anti-Wear protection, and in the case of gear lubes, Extreme Pressure protection.
Bob has some additional info here:
http://www.bobistheoilguy.com/basic_lubrication_design.htm
[ October 29, 2003, 12:36 PM: Message edited by: MolaKule ]