The general mechanism of an air compressor is a piston or rotary element (e.g. rotary screw or vane) that allures air flow, which is compressed right into a storage tank. Naturally, because the piston or rotary element needs to move consistently and smoothly for this to function, it generally needs to be lubricated.
In a lubricated air compressor, there is lubricating oil which will keep the piston or rotary element running well without damaging the system. The lubricant also really 
helps to dissipate heat and maintain air compression efficiency.
Oil-totally free air Water Lubricated Air Compressor compressors also use a piston or rotary element, however they bypass the lubrication problem by coating the compression element with a pre-lubricating material like Teflon. Some oil-free compressors may also use water instead of essential oil for the lubricating and cooling process. These alternate materials secure the pump and allow the mechanism to go smoothly with no need for any oil-based or synthetic lubrication.