How do we know about natural selection? (Igor and Lithodid-Man only)

When natural selection is in action, how do we get the correct mutation? For example, I have been told that oxygen is actually a poisonous gas. Well, since oxygen is required now to breathe then how could we have evolved that way. We couldn't have inhaled it gradually or else we would have died. What I am asking, how did the whole thing turn out like this where we are all alive? Mutations are supposed to take a while so I don't see how it could have just happened.

Then did we just kind of stop? When the air gets polluted like it is now, are we just sort of adapting to it?