It would be appreciated explaining the internal functionality of SUM function in Oracle, when encountering null values:
The result of
select sum(null)
You're looking at this the wrong way around. SUM() operates on a column, and ignores nulls.
To quote from the documentation:
This function takes as an argument any numeric data type or any nonnumeric data type that can be implicitly converted to a numeric data type. The function returns the same data type as the numeric data type of the argument.
A NULL has no data-type, and so your first example must return null; as a NULL is not numeric.
Your second example sums the numeric values in the column. The sum of 0 + null + 1 + 2 is 3; the NULL simply means that a number does not exist here.
Your third example is not an operation on a column; remove the SUM() and the answer will be the same as nothingness + 1 is still nothingness. You can't cast a NULL to an empty number as you can with a string as there's no such thing as an empty number. It either exists or it doesn't.