I've noticed that while the atmega 328 requires a 16MHz oscillator (if i am correct), some smaller atmega chips like the attiny85 doesn't require one.
Why is that?
How can i know whether an atmega chip requires one or not?
Any help is appreciated 
Voidugu:
I've noticed that while the atmega 328 requires a 16MHz oscillator (if i am correct),
You are not.
How can i know whether an atmega chip requires one or not?
Datasheet. This is the datasheet for the ATmega328P... http://www.atmel.com/Images/doc8161.pdf
The section of interest is...
8. System Clock and Clock Options
8.2 Clock Sources through 8.8 External Clock
Also you might want to know that there is a difference between a 'crystal resonator' and a 'crystal oscillator'. Both can be used as to control the clock speed of a 328p chip as well as several other internal or external means and methods. The Arduino board uses a 16 Mhz crystal resonator to control the chip's clock speed.
Lefty
there is a difference between a 'crystal resonator' and a 'crystal oscillator'.
Absolutely.
One exists and the other doesn't.
One is real and the other isn't.
...sells Crystal Resonators
http://www.vectron.com/products/xo/xo_index.htm
...sells Crystal Oscillators
Which one doesn't exist?
crystal oscillators contain a quartz crystal resonator inside along with additional internal solid state devices and cost several times more. oscillators have 4 pins, need a power supply, and put out a clock signal while crystals have 2 pin and do not.
Voidugu:
I've noticed that while the atmega 328 requires a 16MHz oscillator (if i am correct), some smaller atmega chips like the attiny85 doesn't require one.
Why is that?
a) The 328 doesn't require one
b) You can choose between several clock sources. One of them is an internal oscillator.
OTOH the internal oscillators aren't very accurate, they vary with temperature and voltage. For accurate timing you need an external crystal.