Most production vehicles, whether they are ATVs, UTVs, cars, or trucks, have what is called a wet sump oil system. In a wet sump system, the oil is stored beneath the crankshaft in an oil pan. In a wet sump system, the oil pump sucks the engine’s oil from the bottom of the oil pan up through a tube, and then pumps it to the rest of the engine.
Four-stroke engines are both lubricated and cooled by oil that is circulated throughout the engine lubricating the bearings and other moving parts. After it’s lubricating trip it drains to the sump at the base of the engine under gravity.
In a dry sump system, the oil is stored in a tank typically located outside the engine rather than in the oil pan. There are at least two oil pumps in a dry sump - one pulls oil from the sump and sends it to the tank, and the other takes oil from the tank and sends it to lubricate the engine. In a dry sump, the oil still falls to the base of the engine, but rather than being allowed to collect in an engine sump, it falls into a much shallower sump where it is removed by a second pump and is pumped into the external reservoir where it is both cooled and (also very importantly!) de-aerated. Oil is then drawn from the remote tank by the pressure pump and circulated back through the engine. The two pumps are often referred to as scavenge pumps and pressure pumps.
Dry sump systems have several important advantages over wet sumps systems. Because a dry sump does not need to have an oil pan big enough to hold the oil under the engine, the engine can be placed lower in the vehicle. This helps lower the vehicle’s center of gravity. The reservoir can also be relocated to another part of the car to improve weight distribution. There can also be an increased oil capacity by using a larger external reservoir than would be practical in a wet sump system. An increased capacity also allows the oil to cool and release entrained gasses from ring blow by and the action of the crankshaft. Basically, the oil capacity of a dry sump can also be as big as you want.
In a wet sump system, turning, braking, acceleration, and running across side hills can cause the oil to pool on one side of the engine. Dry sump designs are not nearly as susceptible to the oil movement problems that wet sump systems can suffer from due to these forces. If the oil in a wet sump is forced to one side in the oil pan the oil pump pickup tube can be temporarily uncovered leading to a loss of oil pressure. Because the scavenge pumps are typically mounted at the lowest point on the engine the oil flows into the pump suction by gravity rather than having to be lifted up into the suction of the pump like a wet sump does. Also the scavenge pumps can be of a different design that is more tolerant of the entrained gasses than the typical pressure pump which can lose suction if too much air is mixed into the oil. Since the pressure pump is typically lower than the external oil tank it always has a positive pressure on its suction regardless of cornering forces.
From a strictly engineering perspective the dry sump is the superior solution, however with real-life economic considerations, where vehicles have to be built to a cost, it is usually eliminated as being too expensive. Dry sump systems do add cost and complexity, and the extra pumps and lines require more oil, so maintenance costs rise accordingly.
So there you have it, more than you wanted to know about dry sump oil systems.