The term "oil reserve" refers to quantities of crude oil that are claimed or estimated to be recoverable given a prevailing set of economic and operating conditions, i.e. mainly in regard to price. If the price of oil increases than more may be transferred from the resource to the reserve, as is true of all commodities.
The term "oil in place" is that amount of oil which is estimated to be held by a given oil reservoir, including that which will prove unrecoverable, in consequence of the particular geology and other properties (e.g. degree of fracture) of the reservoir. It is thus to be classified as the resource, while the fraction that can be produced is the reserve.
The term "recovery factor" is the ratio of producible oil reserves to total oil in place for a given field, and these vary from field to field. They may also change over time Recovery factors vary greatly from oil field to oil field. The recovery factor of any particular field may change over time, according to price and as new technologies for extracting oil, e.g. enhanced recovery methods, are introduced.
There are four criteria that must be fulfilled for the classification of a reserve, namely that it must be:
(1) discovered through one or more exploratory wells,
(2) recoverable using existing technology,
(3) commercially viable (given the contemporary economic climate),
(4) remaining in the ground.
All reserve estimates carry a degree of uncertainty, according to the available geological data and how these are interpreted. Accordingly, a further subdivision is introduced to indicate a relative degree to that uncertainty, using the classifications, proved and unproved, as defined below.
These are reserves that are claimed to have a reasonable certainty (usually at a confidence of 90%) of being recoverable under existing economic and political conditions, and using existing technology. In the industry, this is known as P90 (i.e. with a 90% certainty of being produced). Proved reserves are also known in the industry as 1P.
Proved reserves are further sub-classified as Proved Developed (PD) and Proved Undeveloped (PUD). PD are reserves that can be produced from existing wells, or from additional reservoirs where any additional investment (operating expense) is minimal. PUD reserves require additional capital investment, e.g. drilling new wells and introducing gas-pressurisation in order to bring the oil and gas to the surface.
Companies listed on U.S. stock exchanges must substantiate their claims, however, there are governments and national oil companies which do not do this leading to some speculation that e.g. the Saudi fields may hold less oil than is claimed.
Probable reserves are based on median estimates, and claim a 50% confidence level of recovery, which is referred to in the industry as P50 (i.e. with a certainty of being produced of 50%). This case is referred to in the industry as 2P (i.e. proved plus probable).
Possible reserves have a lower probability of being recovered than probable reserves. The term P10 is often used for reserves with at least a 10% certainty of being produced. Reasons for classifying reserves as possible include varying interpretations of geology, reserves not producible at commercial rates, uncertainty due to reserve infill (seepage from adjacent areas), projected reserves based on future recovery methods. The term in the industry is 3P (proved plus probable plus possible).
Unproved reserves are used internally by oil companies and government agencies for future planning purposes, but do not normally feature among the numbers quoted in external publications, which tend to err on the side of caution. This is perhaps no surprise since in 2004 Shell got itself into a lot of trouble when it was found to have considerably overestimated the amount of oil in its holdings.
Dr Richard Pike, the CEO of the Royal Society of Chemistry, and an "oil-man" of some 24 years experience, has made the case that the normal procedure of simply adding together the individual oil holdings to make a grand world total of 1.2 trillion barrels, is inaccurate and that a probabilistic analysis (i.e. according to the amount that it is likely to be recovered according to the probability of recovery from different fields) is a better approach. The result is significantly different since it suggests that the amount of recoverable oil is most likely more than double the accepted estimate, i.e. in excess of 2.4 trillion barrels.
I have no dispute with what Dr Pike is saying, and there may well be more oil down there than is generally spoken of. However, if that oil cannot be recovered at a sufficient rate (given the prevailing economic situation) to match rising demand for it, a demand-supply gap will ensue. Economically this will push up the price of oil and encourage further development of even previously non-economic sources, but a rocketing oil price is likely to force an economic downturn overall, as we have seen in these last months of 2008. Indeed, a number of oil-development projects have been put on-hold because the contemporary oil-price is so low as to not make them worthwhile.
Peak oil will come, as it must, if it has not done so already, but it is the gap between demand and supply that is the real issue: the actual peak will simply make matters worse, by drawing down the supply side further and enlarging the chasm between the two. Then the price of oil will increase relentlessly.
Related Reading. http://en.wikipedia.org/wiki/Oil_reserves
 "Peak Oil Postponed", By Andrew Orlowsi: http://www.theregister.co.uk/2008/09/17/richard_pike_rcs_interview/