As someone who was just accepted for an interview at Merton College, I feel in a position enough to say that you need to take what people say here with a pinch of salt.
I didn't achieve shining AS grades. I was very disappointed, actually. But I got an interview with an A in English, a B in History, a C in Geography and a D in Maths to study Classical Archaeology and Ancient History.
I was very pleased with my GCSE's - 2A*'s, 6A's, 4B's and a C. Looks like some of the people here would be massively disappointed with those grades though.
No, it's not medicine. But it is an interview. And guess who didn't get in? The genius in my year with A's at AS, and equally high GCSE grades.
I was allowed late entry, and I'm only on track for 3A's if I work my little socks off, but I still got an interview and I'm proud of that.
The admissions officers are human, not computers, and therefore able to consider many factors when judging an application. Sure, the higher grades you get, the better your chances. But don't give up hope because you got a B for goodness' sake!
I went to Cambridge Summer School, and they told me this:
Don't worry about GCSE's - if you show enough promise in your A-Levels, you have a good personal statement, and your teachers write a good reference predicting you the grades you need, they'll take into account that you have shown more academic potential as you mature.
Don't worry about bad AS Grades - Their main priority is your highest 3 grades, or, the ones you'll take to A2. They don't worry so much about your fourth grade as long as you show potential in the subject you're applying to, and if the fourth grade is a bad one in a related subject, you can mark it as pending on UCAS and retake.
Oh Yeah, Retakes - Cambridge for sure allow you to retake your AS year if you aren't happy with your grades. They understand that sometimes you just have bad days and you don't do so well in your exams. It's fine.
If you have any real concerns, ask an admissions officer - ring them up. They're very nice people, and not as strict as I'm sure you'd imagine. Don't let the advice of people who don't necessarily know what they're talking about keep you from applying. I nearly did, and I would've regretted it. Just like anyone else here, take what I'm saying with a pinch of salt. It's not true for all cases, and by no means am I an expert in admissions, but then neither are 80% of the people giving out advice here.
Think about this: Are you from a deprived area? Does your school send many candidates to Oxford each year? What is the average set of grades people from your school/area achieve? Do you have any extenuating circumstances -death of a close family member, long-term illness of yourself or a family member, financial difficulties, any other extreme situation?
Do your best, revise, and ask the right people whether or not you can apply, because if I can with my less-than average grades, I'm sure you can too.
Keep smiling