The OFA suggest installing in special top level directories named /u01, /u02, etc. (technically, you can actually name them anything you want, so long as you keep the same idea). Before installing Oracle you should create the directory structure for Oracle and change ownership of the directories to oracle:oinstall. Each top level directory consists of both app and oradata directories (eg: /u01/app, /u02/oradata, ..) where the app directories contain user directories for each database user and the oradata directories contain Oracle datafiles. In this way, your actually installing Oracle into the oracle user directory. Therefore, you should set this directory (/u01/app/oracle) as the home directory for the /textitoracle user.
The following are some examples of Oracle directories that conform to the OFA.
/u01/app/oracle/ Base /u01/app/oracle/oraInventory Oracle Inventory /u01/app/oracle/product/ Oracle Software /u01/app/oracle/product/9.2.0 Oracle9i Home /u01/app/oracle/product/10.1.0/db_1 Oracle10g Home /u01/app/oracle/admin/ Administrative /u01/app/oracle/admin/TAR Admin Support Logs /u01/app/oracle/admin/db_name1/ Admin Subtree for a SID /u01/app/oracle/doc/ Online Docs /u01/app/kjf/ Oracle Home Dir for user kjf /u01/app/edm/ Oracle Home Dir for user edm /u02/oradata/ Oracle Data /u02/oradata/db_name1/ Data for SID
When you install Oracle, some files will also be installed in /var/opt/oracle, namely the "oratab", which lists the available database instances and whether they are start-able. If they are defined here as startable you can start databases using the "dbstart" script. (Think of dbstart being to Oracle what the startx script is to X11).