The purpose of the bag it selv is to dilute the oxygen with normal air, to improve system efficiency. When breathing 100% pure oxygen some O2 will be exhaled; it gets mixed with fresh oxygen in the bag, thus it's called a rebreather bag. When in use it will inflate to a certain extent after a while; just don't panic when it doesn't inflate right away. You inflate it - not the oxygen.
As far as I know anyhow...