Oil sand occurs fairly uncommonly in deserts and similar biomes, in veins between sand, sandstone and stone blocks. It is found at almost any altitude (layers 10-80). It occurs in fairly large deposits, almost as large as deposits of coal ore.
Oil sand also more rarely occurs in much larger deposits underground (layers 30-60), surrounding a small amount of crude oil.
Oil sand must be mined with a stone pickaxe or better. It drops one piece of bitumen when mined. More bitumen is dropped if a Fortune enchanted pickaxe is used. Oil sand itself can be obtained by mining it with a Silk Touch enchanted pickaxe.
When oil sand is broken, some crude oil comes flowing out. This oil cannot be picked up and eventually disappears.