The oil is used to welcome people into the Circle, and also for blessings and consecrations. It's symbolic of the element of Spirit.
Any kind of oil may be used, providing that none of the celebrants are allergic to it. The kind pictured here is Linden oil, from the blossoms of the linden tree. It's fairly hard to find; but I think it's worth the effort. You can also mix your own oils. We have done that, and have different mixtures for different occasions.