The reaction between sodium and oxygen is called oxidation because electrons are transferred from one atom to another. More specifically, it's called oxidation-reduction. Oxidation is the loss of electrons and reduction is the gain of electrons. The two must occur together because an atom can't lose electrons without another atom to accept them. When sodium reacts with oxygen each sodium atom loses an electron, which means sodium is oxidized, and each oxygen gains two electrons, meaning it's reduced.
The equation for the overall reaction is:
2 Na + O2 -> 2 NaO
An oxidation-reduction reaction can be written as two half reactions, one showing oxidation and one showing reduction:
2 Na -> 2 Na+ = 2 e- (ox)
O2 + 2 e- -> 2 O-
The two half reactions are multiplied by coefficients, if necessary, to arrive at the same number of electrons in each half reaction. They are then added together, canceling out electrons and producing the equation for the overall reaction.