Oxygen is MAGNETIC?!

This is probably a stupid question, but... as I see it, you've got two oxygen atoms bound together, in a sea of O2 molecules bouncing around, colliding with each other. As I understand it, each atom (and, by extension--more or less--each molecule) is... has a sort of "cell wall" that is the electron cloud.

 So, should I visualize this--FASCINATING--interaction as this electron cloud acting more like an electron "shield," aligning the molecules just so? Or do atoms behave differently once they bond? Or am I not visualizing this correctly? 

Or am I just completely off base? 

Sorry, I have a lot to learn.