one end of the zener is biassed to 1/2 X 12V = +6V, when the other end goes to -2V the zenner conducts and protects the base of the transistor from negative volts that would blow it up.
oscillators need two things, a source of "gain" and some feed back mechanism, to make sure that any noise is fed back to be amplified and the amplified version adds to the original noise. In the end some limiting happens so the signal stops at some level such as the collector voltage going from 0 to Vcc. As this is happening at some frequency the gain is higher then at all others, so the oscillations stabilize at this frequency. The transformer performs the function of making the phase of the voltage at the base equal to the phase of the voltage at the collector. If you swopped the connections to 1 and 3 on the transformer it would stop working as aan oscillator.
Frank