Wine oxidises when it is exposed to air. When wine tannins are oxidised, a chemical reaction occurs - Hydrogen Peroxide is produced which then leads to the oxidysing of Ethanol Acetaldehyde.
This process results in a distinctive sharp odour and deterioration in colour to a more brownish tint. The process reduces the tasting quality of the wine, which may only initially diminish enjoyment but often leads to spoilage and undrinkable wine.
Oxidation can occur at anytime in the wine making process and even after bottling.
The biggest factor in oxidation is the amount of wine surface area exposed to air.
Wine bottles should be layed on their sides to keep the corks moist, help prevent cork shrinkage. If the cork shrinks, small amounts of air can enter the bottle and the wine will then oxidise. Oxidation then decomposes the wine which leads to loss of desirable flavours and change in colour. However, with the advent of the screw caps replacing corks, the oxidation problem may soon be a thing of the past.