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OK, basically what you are doing is setting variables, then installing the variable/value pairs into the environment, in this case the bash shell.
In a nutshell this means that any process started from that bash shell inherits those variables from the shell.
So, when you launch your oracle DB server, it's going to look in its environment and read the values of those variables in order to configure itself. In other words, the database expects to be able to (is programmed to) read the values of ORACLE_HOME, ORACLE_BASE, etc. and do relevant internal things with them.
Hope this helps.
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