Oxygen we inhale is transferred to our blood using gas exchange at our capillary beds. Capillaries are the smallest blood vessels in the body, at only one cell thick, and when they form a network (or capillary beds) between our arterioles an venules, both slightly larger blood vessels in our circulatory system, they are the site where O2, CO2, and other nutrients are exchanged between the lungs and the blood. Oxygen-poor blood is pumped from the heart toward our lungs. Once there at our capillary beds, O2 moves from our alveoli, or the sacs in our lungs, to the blood and CO2 is offloaded. The O2-rich blood is then pumped back to our heart and then to the rest of our body. Image from http://mysciencevirtualclass.blogspot.com.br/2011_01_01_archive.html.