I agree, Skyrim looks so much better.
Not because of that, you can't really compare graphics between games that are from a different era. The reason why i don't like oblivion is the graphics style, combat system and the garbage magic system. Every time i see Oblivion and i look at its graphics style, it always seems so bland. All clothes look sparkly shiny even if you found them laying around in a damn river and lack detail. The combat system is truly the rock bottom. If you see a great horrible enemy, hitting him with your combat style of choice doesn't even shake him. The differences between not blocking and blocking never made a real difference in the wise of how much health and stamina you lose, power attacks never made a big difference in terms of how much damage you did.
The quests never make you pay too much attention to the world.
Take the imperial city for example. I still don't know how the forget do i navigate trough it. Why? Because I've never had to pay any damn attention to it. Why? Because the NPC's never tell you how to get to certain places. Most of the time in Skyrim and all of the time in Morrowind, the NPC's that send you on quests give you directions to where you're supposed to go, and that way you gain knowledge of how cities are built together, for example, an NPC tells you that the market is left of the blacksmith. The guy near a well tells that the blacksmith is below the city park and the blacksmith tells you that the city hall is left of the well. In oblivion you are told "go to ----" and a compass arrow appears and you just have to follow it, never learning what the world is like. Also the world feels really bland. It seems that bethesda liked to re-use some of the models for fortresses and dungeons a bit too many times, making the world feel like its looping as you go in different places.
Morrowind did very well in terms of how much does the player learn from the world, because you have to pay attention or you are going to get lost. instead of compass way points you get directions to where you have to go to kill this and take back that, which can be always read from your journal. Hearing rumours and secrets from NPC's really draws the map of places you haven't visited yet for you. When i played Morrowind, i really noticed that i could tell where everything was and i most of the time knew how to get to different places. In oblivion, i'm just walking around following a road and going to caves that i find on my way. Fun? No. Why did this work in Morrowind/Skyrim? Caves and other places were quite uncommon and most of the time in Morrowind at least, you had some enemies on the over world to take care of. In Skyrim the enemies are paid off with good soundtrack and some scenery.
When it comes to combat, the Arena quest line really shows you one of the bad things in the game. After i got to the sixth or so enemy in that little campaing, my enemy started bouncing few meters in to the air and moved faster than a little kid who just ate a jar of nutella, even if they were wearing heavy armor. It's like the game though i was so good, they decided to drug my opponent so he will spam 5 attacks every milisecond. Whenever i played oblivion, i felt like my attacks didn't really do anything to my enemies. i just hear the ordinary "SLICE" sound every time i hit someone and then kept whaling on them until they perhaps in a few years died. The magic system is completely torn apart. Basically "magic" in the game is just this alternative attack that you have, and never has a place in a real battle. All wizards and mages in the game have daggers that they attack you with once they run out of their "fireball".
The absolute worst thing in the game is the amateur voice acting. Morrowind had almost no voice acting at all. Oblivion only had like 7 voice actors and they all sounded the same for different races. Baurus spoke like every other redguard, Martin spoke like every other imperial in the game. There are many examples of this i could mention. In my opinion, Oblivion is probably the most dull game in the entire series, and shouldn't be treated as one of the best, and anyone who feels like that they are bad people for disliking this game, then don't feel bad.
Now do note this: I haven't played Oblivion in quite a while, so some of the information above may be false, or i just sucked at playing the game.
You guys should check out the "Dumbing down of Skyrim/oblivion" video on YouTube. It really explains why the series is going downhill.