The file oratab is created when you install the Oracle Database server product.  This file is typically found in the /etc directory and contains entries in the format:

 sid:oracle_home:Y|N

 So the sid represents the System Id of an Oracle Database on the current server, oracle_home represents the home of where the database instance resides, and the Y|N indicates weather or not the database instance starts at bootup. Y=Yes, N=No. 

 This file is used during the dbstart, dbshut, and oraenv commands, and can also be used in custom scripting to cycle through the databases instances housed on the server.