found an interesting discussion of the types of air compressors.
Oil-Free and Oil-Type Compressors
To better understand oil-free compressors, it is helpful to explain oil-type compressors first. Oil type compressors use lubricating oil for three main purposes: lubrication of moving parts in the compression mechanism, cooling of the mechanism and the exiting air and entraining contaminants that enter the compression process through the air inlet. Oil-free compressors do not directly involve oil in the compression mechanism for any of the above three purposes. They may have oil involved in other parts of the compressed air process such as motors and gearboxes, however.
The Key Issue
The controversy centers on whether the compressed air user can tolerate the inadvertent trace amounts of residual oil in the air from oil-types--either as mist or vapor--in their process. Some tooling and motors count on it, and some processes requiring absolutely pure air such as biological, pharmaceutical and food cannot tolerate any oil whatsoever. This is not to speak of the environment inside the plant where the compressed air is consumed and vented to ambient.
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Read more: http://www.ehow.com/about_6147902_oil-oil-lube-air-compressor.html#ixzz2lJLXynw3
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