The difference is really how you want to store your data and then find it. Let me enumerate the different ways.
1. You create a custom type and add meta-data attributes in your type. This is a good method if you have unstructured content like a word document that coincides with your meta-data.
2.You can create a Documentum Form Template. In this case you will store your meta-data as xml content of a generic form object type.Saving as xml content allows you to have complex data grouping (nested groups). This is a really great alternative if you have xml content that is complex.
3.Documentum Forms also allows you to build a form that binds to a custom type as well as store some attributes as xml.
At this point I have only talked about storing your data. The real benifit is when you want to query on the data, A normal custom type can be queried with a well defined DQL statement that is very similar to SQL. This is great if your data is organized in a flat structure. A custom type has limitations on how the data can be structured based on the limitations of a database. For complex data you would still want to query on your data. Using xDB allows you to query your data with xPath statements that allows you to query your complex data in your content. So if you are already using xml content, you might as well put that content in a xDB store so that you can query on it.
Oracle is relational, but offers XML support; possibly, your organisation currently uses this.
EMC Documentum xDB is a stand-alone, native XML database. There's a separate product, called Documentum XML Store, which integrates xDB into Documentum Content Server; this would be, in your own words "an additional database sitting next to the Oracle Database". Occasionally, people may say "xDB", when they're actually talking about the "XML Store".
A brief introduction on these products can be found in EMC XML Products.
For further information, you might have a look at Building XML-based solutions using EMC Documentum xCP versus EMC Documentum XML Technologies.
These documents also include links to product information.
XDB vs Oracle is discussed in more detail in Feature Comparison: EMC Documentum xDB vs. Oracle XML DB & IBM DB2 pureXML.
These and other xml- and xdb-related content are available in the dedicated XML Technologies community. If you need a more specific answer to your question, post it there in a new discussion.
A nice example of an xDB-based application is discussed in https://community.emc.com/community/edn/blog/2009/10/25/emc-developer-platforms-mashup.