If a watch has been used for a years, or setting around for some time (years, even decades) debris make there way into the “guts”, and the oil evaporates and deteriorates. This deteriorated oil mixes with the dust and create a sticky gritty substance that actually wears the pivots more than if there was no oil at all . The balance wheel in particular receives extreme wear, as it oscillates from 14,400 to 36,000 times per hour. When a watch is serviced, it is completely disassembled, cleaned, reassembled and lubricated. Oil is placed sparingly and only at the locations that need lubrication (i.e. pivots, jewels). This reduces the possibility of the oil migrating away from the lubrication points via capillary action.
Omega 565 assembly 
Waltham Vanguard jewels and setting works clean 
Rolex 1570 automatic cleaned
In the early century, watchmakers claimed that a watch should be cleaned and oiled every year or year and a half at the most. The oils used at that time did not hold up as well as modern synthetic lubrication. Even at that, many people of the time ignored that advice and many watches were not serviced for five to ten years, or until the watch stopped working.
If you have acquired an old watch that has not been serviced or used for quite some time, and you plan to start running it, then it should be fully serviced. After that it is generally recommended that a watch be serviced every 3-5 years if run on a daily basis. When I service a watch the following general procedure is followed:
- Complete disassembly
- Cleaned in a three chemical agitation cleaning machine,
- inspected for wear
- re-assembled, and oiled
- mainspring replaced if needed
- Regulated
- High grade watches are adjusted for position etc.
