Try to imagine using a computer without any internet access to book an airline ticket. It doesn't really matter how many or which operations your computer can perform, it is not able to book an airline ticket unless there is another computer which can accept that booking and which your computer can talk to. The internet is next to useless for booking ryan air flights until ryan air puts one of their computers onto the internet and gives it authority to issue bookings.
Blockchains are like virtual computers. It is absolutely possible to imagine ryan air deploying a smart contract to ethereum and giving it sufficient authority to issue bookings but until that happens ethereum is next to useless for booking ryan air flights. This is the oracle problem.
Here I've focused on the write-path but "the oracle problem" usually refers to the read-path. Say you have some prediction market where participants can place bets on who the next US president will be. How do you resolve that market? When Congress certifies the election they do not publish that certification onto any blockchain. Maybe some day they will. But for now blockchains have to make do with various hacks which allow them to imperfectly track what is happening in the outside world.
Blockchains are like virtual computers. It is absolutely possible to imagine ryan air deploying a smart contract to ethereum and giving it sufficient authority to issue bookings but until that happens ethereum is next to useless for booking ryan air flights. This is the oracle problem.
Here I've focused on the write-path but "the oracle problem" usually refers to the read-path. Say you have some prediction market where participants can place bets on who the next US president will be. How do you resolve that market? When Congress certifies the election they do not publish that certification onto any blockchain. Maybe some day they will. But for now blockchains have to make do with various hacks which allow them to imperfectly track what is happening in the outside world.