Ayurved has recommended oil massage everyday. How does it help?

Skin is one of the vata sthanas. Sparsh/Sense of touch is experienced through the skin. Oil is said to be vatashamaka and therefore beneficial for the skin. So 'abhayanga' (Oil massage) has been included in the daily routine which has been charted out for our healthy life.

Application of oil over the body is strengthening. It is to be applied especially over the head and on the soles of the feet.

Shiroabhayanga (Applying oil over the head) is beneficial in relieving all types of headaches.
Helps in the healthy growth of hair and gives it a natural glow.

Paadabhayanga - (Application of oil over the soles of the feet) helps to get good sleep, brings tranquility. It cures numbness of the feet, rigidity, muscular spasms, dryness(cracking) of the feet.
Massage has been contraindicated in fever, indigestion.