Oswald resembles the Disney character, except he has no arms, and his textures are black. The reason for this, as explained by Lisa on Night 2, is because the suit was left incomplete before the arms could be applied to it.
However, Oswald still have all of his key features such as his long ears, a pair of oval eyes, his rabbit tail, and his nose and overalls. His overalls, however, seem to look melted almost, and not as they were in the original cartoons.
Oswald becomes active starting on Night 2. He starts in the Storage Room, where he can be clearly seen lying on the ground, and will stand before he exits the Storage Room. He can hide from the cameras like Photo-Negative Mickey. When he appears in the office, he is seen next to the Treasure Island sign, The player must then shut off a camera, hide under the desk which gives the player a 50/50 chance of surviving, or shut off the power. If none of these actions are taken, then Oswald will jumpscare the player.
Oswald has been known to speak in a very deep voice echoing throughout the island. He seems to move or about to move every time he does this, saying things like:
"Bless your soul..."
"Don't bless this one...."
"Have mercy on me please... I only ask for blessing..."
"God?... God?... God?..."
"God?... Where are you God?..."
"God?...Please listen to me..."
"I know you're here, so, please bless me and help me out here."
Oswald's messed up textures were caused by a modeling error.
Since Disney lost the rights to Oswald before 1928, there is no logical reason for there to be an Oswald suit here, since Discovery Island was closed long before 2006, when Disney got Oswald's rights back.