Oregon "law" does not "require" mediation, however, many counties have made mediation a requirement through their Supplemental Local Rules (SLR).
Mediation is oftentimes court ordered (parties have no choice but to attend - at least once), and is paid for through the court (a certain number of hours are paid for by the court, sometimes 6 hours, sometimes 8 - it can depend on the County's resources).
Medication typically only addresses the issues of custody and parenting time. The mediator is a neutral third party and not allowed to testify in court if mediation fails. In addition, things said, and offers made, during mediation are not permitted to be used in court as evidence - this rule is strictly enforced. The reason mediation information is not allowed in court is because the courts want parties to make the best deal offers possible without fear of those offers being used against them in court if mediation fails.
Friends, family, and lawyers are not allowed to attend mediation with the parties - only the parties and the mediator are present at each session. If a restraining order is in place, sometimes mediation is avoided, or done one party at a time and the mediator goes back and forth respectively.
If parties come to an agreement in mediation, the mediator will oftentimes write up the custody and parenting time agreement, which can save the parties much time and money - even if other issues must still proceed to trial.