Yep! At the tube stations there are turnstiles with flat, round, yellow card readers that you touch your Oyster card on as you go through. After you get to where you are going, you will touch your card to get back out of the tube station, and your fare will be deducted.
You can also use the card on most buses and you can load it with £s or passes. Before I bought my car, I had my monthly bus pass loaded on it and other people have yearly tube passes etc.
It's up to you how you use it. Passes make more sense financially if you are using the tube or bus everyday, but it's not required that you do it that way. Right now, I just use my card for individual trips into the city so I load it with £s only.