The term "making oil" refers to the condition of an increase in oil level in the crankcase. For example, a leaking head gasget can cause water to get into the crankcase. In this situation, the oil is visibly discolored and might appear white or "milky".
Gasoline can also enter the crankcase and mix with the oil. Blowby (around the piston rings), a leaking fuel pump diaphragm, or in some cases vapor canister/breather hoses can cause this to occur. The oil viscosity will drop, and as one member noted, it will reek of gas. Im my case, the Yamaha Technician seems to have nailed the cause of my problem - my engine was overpropped. This causes the engine to work harder and therefore increases blowby. Increased blowby can "carbon up" the rings which adds to the problem. I changed back to my original prop (which increased engine RPM and decreased load) and used some Mercury Marine "Power Tune" (to reduce/eliminate carbon on the rings). I still need to get a few more hours of operation to confirm the effectiveness of these changes, but so far things look much better. -Woodnaut