Taharos, Chapter 9, Mishnah 3. This chapter follows the olive from the tree to the press. A food becomes able to contract tumah only after a liquid has wetted it, and with olives the liquid in question is often their own sap, the moisture that seeps out as the fruit sits and softens in the vat. That moisture only creates hechsher, susceptibility, when the owner is content to have it, which means when his labor with those olives has come to an end. Our Mishnah takes up the case where it has.
"Nigmerah melachtan, harei eilu muchsharin": once the work with the olives is finished, they are muchshar, prepared and susceptible to tumah. Their own sap has now wetted them with the owner's satisfaction, and the fruit stands ready to receive tumah. "Naflu aleihen mashkin, teme'in": and so, if liquids fall on them, the olives become tameh. That is simply the natural consequence of susceptibility: what can become tameh, does.
The Mishnah now shifts its attention from the olives to their sap. "Hamohel hayotzei mehen": what of the moisture that oozes out of olives that have already reached this prepared state? Does it count as a genuine liquid, capable of conveying tumah? "Rebbi Eliezer metaher vechachamim metam'in": Rebbi Eliezer holds it tahor, while the Chachamim hold it tameh. Behind Rebbi Eliezer's view lies a claim about the nature of sap: to his mind it does not have the status of a liquid at all. The Torah's list of seven liquids, those that make food susceptible and that are themselves subject to tumah, does not include it, so it remains altogether beyond the reach of these laws. By saying so, Rebbi Eliezer is taking issue with what our chapter established earlier, whereas the Chachamim stand by it.
Rebbi Shimon now recasts the entire machlokes. "Amar Rebbi Shimon, lo nechleku al hamohel", he says, when the mohel in question is "hayotzei min hazeisim, shehu tahor": no one ever quarreled over sap that seeps out of the olives themselves, since both sides consider it tahor. "V'al mah nechleku? Al hayotzei min habor": the point at issue was a different substance entirely, namely what emerges from the vat.
To follow this, imagine how the oil is produced. The olives are heaped in the vat, where they soften and release a great volume of liquid: oil, along with every other bit of moisture the fruit contained. Once the batch has been cleared out, what is left over settles into two distinct strata, the oil floating above and a thick, heavy sap collecting underneath. It is that lower residue, after the oil has been removed, that Rebbi Shimon calls "hayotzei min habor".
About that residue, "sheRebbi Eliezer metaher vechachamim metam'in". Rebbi Eliezer rules it tahor for the same reason as before: the stuff is thick and dense, and he does not regard it as a liquid. The Chachamim rule it tameh, because such sap inevitably has some oil mixed into it, and once oil is present we must treat the whole of it as a liquid, exactly like the oil itself.
The halachah follows the Chachamim, understood according to the plain ruling of the Tanna Kamma at the opening of the Mishnah: once the work is finished, the olives are susceptible, and the sap that emerges is treated as a liquid that can become tameh.