Three natural methods of oxygen production were known before this study. The best known and most common is photosynthesis, in which plants, algae, and some bacteria convert carbon dioxide and water into sugars, which releases oxygen as a waste product. The other two methods are the creation of oxygen from chlorates in bacteria cells and the conversion of reactive oxygen materials using enzymes.
The newly discovered process is used by a microbe found in nearly oxygen-free canals and ditches in the Netherlands, although its particular strain was first discovered in caves in Australia. In the presence of methane gas and nitrites, the microbes broke down the nitrites into nitric oxide, which they then split into nitrogen and oxygen. The oxygen was then used to burn the methane for energy, and the nitrogen was released as a waste product.
The researchers at The Netherlands at the Radboud University in Nijmegen are confident this is what the microbes are doing, but they're less certain how the microbes are doing it. There is some thought an enzyme of some sort is involved, but there are hundred of proteins whose properties are still unknown that could be directing the expression of the enzyme. As such, the exact mechanics of this new oxygen-creating process remain poorly understood, although it's definitely unlike anything seen before.
The researchers are also excited about the potential wider implications of this discovery. Primordial bacteria might have used this method to create oxygen on the early pre-photosynthesis Earth, when the atmosphere was rich in methane and poor in oxygen. This process may also shed new light on the mechanics of methane cycles.
But perhaps most intriguingly, this new process provides a potential method for life to exist on oxygen-low, methane-heavy environments like those of the planets and moons of the outer solar system. In fact, this method would not require there to be any free oxygen in the atmosphere at all - as long as there was sufficient methane and nitrites, that would actually be more than enough for microbes using this process to survive, even thrive.