The discharge plasma in oxygen as a processing gas can react with the polymer surface to create various oxygen-based functional groups, e.g. C-O, C=O, and/or O-C=O group. In oxygen discharge plasma can be observed the formation of oxygen-based polar functional groups on the surface of isotactic polypropylene through the interaction between the active species from the plasma and the polymer surface atom. The chemical interaction in oxygen-based plasma systems also creates strong covalent carbon-oxygen bonds, that are of higher polarity than the initial carbon-hydrogen bonds.

Expanding a little on Igor Novak 's answer: most polymers for large-scale usage are rather inert at room temperature, that's what gives them their technological relevance in many cases. Therefore they will also not react with "normal" molecular oxygen.

Atomic oxygen on the other hand is highly reactive and will essentially bind to every surface at which that is remotely possible.

Whether you are actually etching the layer or oxidizing the surface depends on your material. For etching, the oxidized surface species need to leave the surface as CO or CO2. If the activation barrier for this process is very low, you will etch already at room temperature, if it is high, you will only put an oxide layer on the layer surface.