We have extensively studied the effects of oxygen on the optoelectronics properties of various types of isolated silicon nanodots, through ab initio total energy calculations within the density functional theory. Varying the cluster size we have considered different Si/O bonding geometries and different levels of oxidation. We provide strong evidences that the role of the interface region surrounding the silicon nanostructures have to be carefully taken into account in order to understand the striking optical properties of these systems. Moreover the multiple presence of silanone Si=O bonds at the nanodots surface is shown to provide a consistent interpretation of the photoluminescence red-shift observed in oxidized porous silicon samples. Finally for the first time we have performed ab initio calculations on small silicon nanodots embedded in a SiO2 matrix stressing the strong interplay between the nanodot and the surrounding host environment.