Is it necessary to keep tools lubricated?
Short answer: Yes, if you want your tools to last.

A quick story:
I have a set of Crestoloy Crescent wrenches that are nearing 100 years old.  They were passed from my Great Grandpa to my Grandpa to me.  I use them at least once a week.  The tools have worked on farm equipment, on boats, on cars, and on houses.  At times, they have been carelessly left in fields or damp environments.  During all of this, the tools were regularly wiped down with a thin layer of oil.  Today, those wrenches are devoid of rust and fully operational.

Oil on the metal portions of tools will do wonders for the longevity of the tool.  The oil will repel water and prevent rust, along with lubricating any moving parts.

The type of oil doesn't matter so much (see the comment below for someone who knows more about oil than I do).  Lots of people recommend WD-40.  It's cheap and widely available.  My Great Grandpa used clean motor oil on all of his tools.  A dab of oil on a rag, then wipe them over the tools when you're done working.  I use lubricating oil meant for an air compressor.

You don't need much oil to get the job done.  None of my tools feel greasy; all of them look and feel dry, except on the moving parts.

A warning.  Do NOT oil plastic or rubber parts of your tools.  Oil can make plastic and rubber pieces (like handles) brittle and lead to cracking.