[Ando140]

Air is the same mixture throughout the entire atmosphere. Dry, it is about 78% nitrogen, 21% oxygen and 1% other gases. Maybe that 17% number is referring to your lungs absorbing the same amount of oxygen at 5,000 ft as they would if the atmosphere was 17% oxygen at sea level? You lose approximately 1" of barometric pressure per 1,000 ft in altitude in the first few thousand feet of the troposphere (which is what we live it, it goes from the surface and the top varies anywhere from 25,000 ft at the poles to 65,000 ft at the equater, and it varies by season). So, as we know, the higher you go, the less dense the air is. Warm air is less dense than cold air, and humid air is less dense than dry air.
What happens with engines as altitude increases is, less fuel is able to be vaporized in the thinner air. I believe the computers on our trucks will automatically lean the fuel/air mixture, otherwise (as with older vehicles) you would end up with an overly rich mixture and risk fouling of the spark plugs caused by carbon. What you end up with is less fuel consumption and less power for any given rpm at higher altitude (that doesn't necessarily mean better gas mileage, you may have to run in a lower gear at higher rpms). The exceptions to this are, of course, turbochargers and superchargers which won't be affected until the altitude exceeds the amount of boost provided.
As for the octane thing, I would think you can go lower. Higher octane means the fuel can withstand higher pressure without detonating. Since there would be less pressure in the compressed cylinder for high altitude driving, it makes sense that you could use a lower octane fuel.