When we breathe air in through the nose and mouth, It makes its way into the lungs and dissolves in the water lining of the alveoli. Oxygen then diffuses into the blood. The RBCs of the bllod has hemoglobin which can carry oxygen. The iron atoms carried by hemoglobin react to the presence of oxygen by bonding with it in a process called oxidation. Inside the red blood cells, these oxidized hemoglobin molecules hold onto their oxygen cargo until they get to a part of the body that does not have enough oxygen, where it is then released.