I would have guessed ball bearings, but a brown liquid just poured out of the shaft and it looks like oil and smells burned. I'm sure it's not a good thing either way -- any ideas what it is?
Yep, anything with ball bearings has to have some sort of lubrication (usually bearing grease or maybe gear oil). Without the lubrication, heat would build up due to increased friction and the metal in the bearings (and gears) would crack and eventually fragment, causing total failure in the system.
The answer to your questions are yes they use oil and bearings.Without bearings it wouldn't last very long and without the oil to keep the bearings lubricated it would last even less.
