The Oracle...
As far as I understand it, the Oracle indeed can read the code and figure out how that person will react. She is like the Architect; she is a god. Unlike him, she introduces free choice and to disobey the system. (Ever wonder why she talks about candy all the time? The candy represents disobediance, like the red pill.) She is also capable of see how others connect to Neo's destiny. Remember ETM during the poweroutage in her apartment, which was a sad way to cover the fact it wasn't Gloria Foster, she had a conversation with Seraph.
She said, "The truth is the path of the One is made by the many. There are so many choices between here and there and so much fear. And if but one fails, all fail."
With Niobe, "I see everything from the beginning of the path to the end. Even I can't see past the end. I can only hope, if given the chance, you(Niobe) will do what you can to help Neo."
In Reloaded, "One can never see past a choice they don't understand." "You've already made the choice, you're here to understand WHY you made it."
In Revolutions, "It's his (Architect) job to balance the equations, mine is to unbalance them." "I didn't always know, but I believed."
She is a guide to help people make the decisions that may be needed to be made. Kinda like in some RPGs how one event alters the game and new different choices spin off from that.
My two cents, feel free to flame me and poke fun at me because I might be wrong. Everyone else does. Good Day.