I'm not an expert, but I think rancid oil is oxidised oil and thus acts like any oxidised chemical: it tries to steal an electron from somewhere else, including inside our bodies - "free radicals" - which can damage things like our DNA. There's also some link to how it can change the behaviour of proton gradients in our cells (I read about it a while ago in "The Vital Question" by Nick Lane) but I'm sketchy on the exact details.