The oscillation is a natural consequence of the predator-prey relationship between the mice and foxes. A qualitative interpretation could be:
If the mouse population is high, then the population of foxes will increase because foxes eat mice. But as the population of foxes rises, the population of mice begins to decrease, since they are being preyed by foxes. Then, while population of mices declines, that of foxes do the same, because there are fewer mice to eat. Finally, with a low fox population, mice population can rise again, repeating the cycle.
These dynamics are capture by the Lotka-Volterra equations for predator-prey relationship.