Oxygen may seem confusing at first - this article is meant to orient you somewhat.
Each of these work together to bring you the full functionality of Oxygen.
Elements are the design blocks that Oxygen supplies. These include simple elements such as :
But some elements are more complex such as
There are also layout elements like
Templates are design layouts for
or any other type of page you can target in WordPress.
Oxygen templates are created by arranging elements to build up a design layout for any of the above classes of page. This means you can write basic content in WordPress using the Gutenberg editor, and have that content controlled, or styled by the design that you specify in CSS and the Oxygen templates you've created.
Templates in Oxygen can be used as is, or they can be inherited. The idea is that you can create a general framework for your page layout using the main templates (a template specifically created to be be inherited buy other templates), and then inherit a main templates as a starting point for further templates.
These are common design pieces that you want to reuse again and again in different templates. A good example of a reusable part might be a header or footer design piece.
Blocks are design pieces you have made with one or more elements in Oxygen. These will become Gutenberg blocks and will be accessible from the WordPress Gutenberg editor. Yes - this means you can use Oxygen to create Gutenberg blocks for yourself and your clients.
Blocks are particularly useful for clients. Blocks make it easier for you to build a site in Oxygen for a client, because you can have them edit and maintain the site in Gutenberg without having to come into contact with Oxygen.