It is basically the academic side that matters, yes; each application consists of various parts: GCSE and AS grades, predicted A-level grades, the school report, the personal statement, school work that candidates send up in advance, the interview itself and, increasingly for many subjects, some kind of test or exam, whether a standardised one sat at school or tests they take at the college when they come up for interview (eg a translation exercise for languages). We do de-select a few applicants - that is, decide not to invite them for interview - and if that's the case it'll be on the basis of insufficient grades and/or a weak performance in an entrance test sat at school. We do interview most applicants, though, and that's true of Cambridge too.
As I think I said earlier in this thread, several of the aspects are, at least in my experience, more of a 'hurdle' to be got over, and are then rather set aside - I'd include under these the grades (both predicted and attained), the report, and to some extent the personal statement too. Of course we might refer to these in interview - perhaps asking a candidate with unusually poor GCSEs what happened, or starting off the interview with an interest mentioned in the personal statement - but really these are more useful for giving an impression of a plausible candidate, and become less relevant further on. (This must be different of course for universities that are not interviewing.) Almost everyone who applies to us will be predicted straight As now, so from that point of view A-levels have, sadly, become almost irrelevant to us.
So prior to the interviews, tutors sit together and discuss the work that has been sent up (this will have been assessed and given a grade or rank of some kind - if, say, a music candidate sends an English literature essay, it'll be passed to an English fellow for their opinion) together with the results of the entrance test taken at school/upon arrival in Oxford, for those subjects which set one. On this basis, they'll have some idea of a rough rank order of candidates. If you are interviewing, say, 15 for 5 places, it is quite likely that there is 1 (or perhaps 2) who, on the basis of their work/test results, seems very strong; and perhaps 3-5 who seem unlikely to be strong enough. The real competition, to be honest, is amongst the middle 7-10 for the remaining 3 or 4 places. Similarly at interview, the very brightest are, to be honest, pretty unmissable, and the weakest few (comparatively - obviously these are all intelligent people) are usually equally obvious. (This is why students who feel they had a 'very tough' interview are sometimes surprised to find they have got in: tutors will usually be kind to someone really struggling, but will push someone who seems like they might be good enough to see what they can produce/how far they can follow a line of thought.) The peculiar thing about Oxbridge teaching is the very small tutorial groups (1-3) so tutors want to feel that this is someone they could teach enjoyably for 3 or 4 years: that is very much part of the dynamic of an interview, and the successful candidates are almost always those who are able to take a correction on board, think about it, and move on intelligently - it's not about being 'right', much more about demonstrating that you can think. Tutors purposefully try to avoid asking questions that depend upon particular knowledge (because obviously mediocre students with 18 years excellent education behind them often do know more than very bright students from a less good school); and at least in my experience we also try to avoid the kind of 'so why do you want to come to my college?' type questions which are easily prepared for (except perhaps as an ice-breaker). We want to see evidence of some real excitement too: the people giving these interviews have devoted their entire careers to the subject in question, after all!
We try very hard to ensure that candidates who we feel are good enough to be here, but whom our particular college doesn't have room for, get passed to another college or colleges for second interviews (in some subjects everyone gets interviewed at a second college as a matter of course); similarly if someone seemed very good on paper, but botched the interview; or just seemed horribly nervous - quite a lot of candidates relax and do much better second time round, when they feel they've nothing to lose.
Hope that helps - sorry it's so long . . .