I was very confused by the law enforcement in Oblivion the first time I played it. A good example is when i stole from empty houses, the guards outside knew about it.  
 
So right now I don't feel like experimenting with crimes because i might make a save and then find out I'm an outlaw later, or something, and I'm not a high enough level to take on too many enemies.  
Does anyone have any guidelines on how and when to freely commit crime? When are stealing/murder not detected? Are there psychic guards? Is there a difference between doing it in a town or a mountain shack? 
Also, for how long do you remain wanted? Are there bounty hunters like in Red Dead Redemption? etc..

I've been hearing people say psychic guards are back in, but I've seen people say they aren't as well. So I don't know who to believe.

I've been stealing and havent been caught. If your cautious and a good thief you shouldnt have any problems. Make a lot of hard saves and dont rely on auto too much to avoid any potential glitch gambits.

@CL60 said:

I've been hearing people say psychic guards are back in, but I've seen people say they aren't as well. So I don't know who to believe.

It's on and off which is the worst because I don't know what the fuck to expect.

Sneak, steal when you hare "hidden". No one will know.

I have not encountered any psychic guards yet. I've played like 50 hours and whenever I've killed someone in public I've made sure to be hidden. same goes for stealing.

I am really impressed with the lack of psychic guards... which is kind of sad to begin with, but oh well.

Apparently, one should beware the chickens.

I havent been playing a stealth/theaf but It sounds like while the guards may not be psychick the animals are considerd citizans when determaning if people can see you

I was in the Dwemer museum, which is patrolled by three or four guards, opened a door, didn't close it behind me, waited til no guard was in sight and then stole a gem without even crouching and no one noticed.

You need to crouch and be in a hidden state fo steal and get away with it.

Not psychic my ass. While I've never been caught stealing or murdering, every NPC in passing will talk about me like "they know", until I talk to them directly and everything is suddenly just peachy.

It makes me wanna ride a giant dragon and incinerate/freeze their whole village down, two-faced inhabitants and all! Know what I mean?

I've been robbing people blind, I have like 400 stolen items total and not a single guard has said a thing

Fingerprints man, aren't you wearing gloves?

The only time I got caught it was when I talked to the guards and they go "hey... I know you..." and then tell me they had reports about me.

I'm pretty sure someone has to see you commit a crime in order for you to have a bounty. Just crouch before picking locks and if you are hidden you should have no problems.

Does the game differentiate between stolen loot and regular loot?

If you steal whilst hidden, which you should be anyway, then they'll never know.

I have been stealing the whole game and the guards have never known. There was once when a blacks smith sent 3 heavily armored people to kill me for stealing from him though. I have no idea how he knew it was me.

Just make sure that the stealth indicator is completely closed. To be on the safe side try and steal stuff when there's no one in the room. Finally, if you ****ed up you can check your bounty in General Stats i think.