The basic reason for setting up an oil/air separator is that the CA18DET in the S13 Nissan Silvia's and 180SX's have a habit of giving out a bit of an oil residue in vapour form from the breather hose at the top back of the engine. Particularly under higher boost than stock applications, quite a bit of oil can be found in the intake lines that can particularly build up in the Intercooler, this is bad! Oil in the intercooler means trapped oil, less cooling effect, less performance, and so on.. bad bad bad.. 

Basically, you can go spend quite a few dollars on expensive purpose made oil/air separators, I'm sure they do the job well.. but everyone likes to acheive the same thing for under $5.. $2.95 in fact!

What I've done, is what many others have done, so I can't claim this as an original idea! I wondered down to my local Supercheap Auto down the road, and bought a 'generic fuel filter' for $2.95. I then found a suitable spot roughly in the middle of the breather hose, and cut it. Then with the help of a couple hose clamps, put the fuel filter in between, and clamp her up! (I have seen some fuel filters with less than desirable dimensions on their pipe connections.. ie, they're too small for the breather hose pipe to be tightened up to correctly. To get around this, find a more suitable size pipe and slide a 2cm bit of it over the fuel filter ends, and then slip the breather hose over that, then clamp her up).

And obviously, I left the breather hose go back to the intake after being filtered through, as it would in stock form.

Here's some pics below.. try and ignore everything around it, my car's far from stock with the way I have pipes going all over the place.. particularly with the current location of my charcoal canister.. but anyway.. 

Also, if you have a considerably large problem with oil coming through the breather hose, it is possible that you'll notice the fuel filter clogging up quickly (say after a month).. depends on the extent of your problem, and how much your engine is living on the edge and how much boost you're running. As you'll see in the photo's below, my filter is quite clean, and its been there for at least 3 months.