The author has studied the percolation characteristics and displacement mechanism of fractured reservoir by dual-media numerical simulation in detail, as well as sensitivity analysis of the impact of development effect. The results show that the rock stress sensitivity is the key to decide fractured reservoir development strategy. It decides the development model, the ability to maintain reservoir pressures and the recovery of matrix system and fracture system. The crossflow between matrix system and fracture system is very difficult to occur in natural or artificial water energy that sufficient to maintain reservoir pressure. It only appears in the development process of reducing reservoir pressure. Regarding the matrix system, capillary pressure dialysis is the most important percolation characteristics and displacement mechanism. Its recovery ratio may reach over 4%. Regarding the fracture system, the displacement process depends on the external driving pressure differential and is characteristic of pipe flow. Its recovery ratio may reach over 75%. Gravity exists objectively but is rather weak. In process of numerical simulation of fractured reservoir, the oil-water relative permeability curve shape of matrix system and fracture system mainly affects the rise law of water cut, but little on recovery.