Understanding the formation of thin oxides on silicon surfaces is of prime importance as developments in microelectronics demand oxide thicknesses of the order of a few atomic layers. We have carried out first-principles quantum chemical calculations with cluster models to investigate the structural and mechanistic aspects of the initial oxidation of a Si(100) surface. The microscopic steps related to the initial oxygen incorporation as well as oxygen migration and agglomeration on annealing are considered in detail. The calculated activation energy barriers suggest an interesting competition between the steps involved in oxygen insertion and oxygen migration and agglomeration. The presence of surface hydrogen causes significant perturbations on the calculated energy barriers and has important implications to the reaction mechanisms. Our results are used to provide novel interpretations of experimental infrared spectroscopic data.