The oil pump is usually a gerotor type pump (picture a plus sign being rotated inside a five-point star, every time the plus sign touches the inside of a lobe of the star, the cavity between it and the star decreases in size, creating pressure) driven off of some major engine component. I don't know how they're driven on the 3.3/3.8, but the 2.2/2.5 drive them off of the timing belt. The oil gets forced by the pump through holes drilled in the block and head (oil galleries) to critical components like the valvetrain, camshaft, crankshaft bearings, piston rods, etc., before draining back to the crankcase to be sucked up again by the pump. The oil also supplies the hydraulic lifters, which are essentially little hydraulic cylinders that close the gap between the camshaft and pushrod (or rocker arm, in the case of the 2.2/2.5) to keep the valvetrain from rattling. This eliminates the lash adjustments that used to be necessary. If an engine with hydraulic lifters truly has no oil pressure, the lifters will quickly collapse, and the huge gap will sound like one of those fairground BB guns, until the engine eventually seizes from the now-dry lower end welding itself together and the pistons welding themselves to the cylinder walls. Oil pressure serves as sort of a thermometer of engine health. Low oil pressure usually means some clearance is too large and is giving the pressure an easy way out. High oil pressure can indicate sludging, although it's not nearly as serious ans low oil pressure, and the oil pump has a spring-loaded check valve that prevents pressure from going too high.. Unless you've had some sort of catastrophic failure of the lubrication system, oil pressure is lost gradually as the engine wears. If you have oil on the dipstick where it should be, and the engine is running quietly and smoothly, it's almost certainly a failure of the oil pressure gauge or related wiring/sender. To me, it sounds like an electrical fault. I personally like to have a gauge because it can warn you of problems before they become extremely serious, and gives me something more accurate other than the idiot light to let me know what's up inside the engine. It's like a temperature gauge-- 98% of the time you don't need it because it just says that everything is OK and normal, and the other 2% of the time, you're glad you have it.
Sorry about the long-winded post, I always like to have at least a general description of what a part or system does before I try to troubleshoot it so I can picture what's going on.
