The oil penetrates and opens up the structure of the plumage of birds, reducing its insulating ability, and so making the birds more vulnerable to temperature fluctuations and much less buoyant in the water. It also impairs birds' flight abilities, making it difficult or impossible to forage and escape from predators. As they attempt to preen, birds typically ingest oil that coats their feathers, causing kidney damage, altered liver function, and digestive tract irritation. This and the limited foraging ability quickly causes dehydration and metabolic imbalances. Hormonal balance alteration including changes in luteinizing protein can also result in some birds exposed to petroleum. Most birds affected by an oil spill die unless there is human intervention.

Marine mammals exposed to oil spills are affected in similar ways as seabirds. Oil coats the fur of Sea otters and seals, reducing its insulation abilities and leading to body temperature fluctuations and hypothermia. Ingestion of the oil causes dehydration and impaired digestions.

Source: Wikipedia (All text is available under the terms of the GNU Free Documentation License)

For more information (background, pictures, experiments and references): Oil Spills: K-12 Experiments & Background Information