fork oil essentially work like the oil in suspensions.. shocks work by having a spring absorb the vertical forces, while the damping effect prevents you from feeling like you're riding a pogostick. the damping is achieved by forcing the oil through tiny holes cut into discs (at least this is the simplest concept of how it works.. for more advanced types, check out the TL1000's rotary shock)..
so the oil plays an important part in damping. if oil degrades over time, like our engine oil, the damping effect is reduced or weaken or eliminated varying from case to case. less viscous oil, less damping... most of our normal forks (unlike the ohlins etc etc) do not have adjustable compression and rebound damping adjusters.. meaning the only variable we can play with to change damping is changing the fork oil density... (what density to use i'm again not very sure... depends on your needs i suppose)...
er.. changing fork oil is not quite unlike fork seals, so.. we're probably looking at $70 to $80... fork stanchions need to come off, so that the oil can be drained... if they use some funky suction tool, i dunno la... hahaha.. ask your favourite mechanic for a quote!

er as for when to change... either you stick to regular intervals like 15,000 to 20,000km, or change it if you feel like your front forks tend to dive in corners... that's a guide i would use la... would stand corrected!
kneeslider, anything to add?
