Not an oxymoron. In fact, the term "libertarian" was first used by a French anarcho-communist back in 1857 to describe himself (an anarchist). The modern term libertarianism (economic freedoms) was originally called liberalism. The term "libertarian" describes liberty (thus, the term is also used to describe metaphysical liberty within philosophy and metaphysics), and the term
socialism describes a society in which wealth is fairly distributed. Thus, it is neither a literal nor a practical contradiction.
A libertarian socialist would argue that a society based on such huge disparities of wealth is unfree. If you wish to enter into employment, you choose first and take orders later (as with liberal democracy). Libertarian socialists believe in voluntary association and economic democracy. This will allow the individual to reach his/her full potential.
The most famous example of successful libertarian
socialism is the anarcho-syndicalist experiment in Spain during to Spanish Civil War, which was eventually destroyed by Communists and Fascists (see Orwell' "Homage to Catalonia" for excellent first hand reportage of this). At its peak, the anarchist union (CNT) had one million members.
Although sharing much of (if not all of) the Marxist analysis of
capitalism, lib socialists vehemently oppose state
socialism, especially the authoritarian
socialism of Lenin, Trotsky, Mao and, more recently, the
socialism of Hugo Chavez. The modern dispute between the two schools of
socialism began in the First International, in which Karl Marx and Mikhail Bakunin bitterly argued over the road socialists should take. This dispute has continued ever since, with many Marxist regimes imprisoning, murdering (
Russia), and exiling (Cuba) anarchists.
Modern advocates of
libertarian socialism include linguist Noam Chomsky, historian and playwright Howard Zinn, and the Industrial Workers of the World ("One
Big Union"), and the International Workers Association (of which the Spanish CNT is its largest affiliate).
