Silicone gel is a wildly used encapsulation material for high-power electronic devices, but its long-term dielectric performance is compromised by thermal stress, impacting device reliability. The microscopic mechanism linking its structural evolution to dielectric degradation remains insufficiently understood. This study aims to elucidate this mechanism by combining experimental analysis with reactive molecular dynamics (MD) simulations. Silicone gel samples were thermally aged at 200 °C, and their dielectric spectra were periodically measured. Concurrently, reactive force field (ReaxFF) MD simulations modeled the aging process in both aerobic (with oxygen) and anaerobic (without oxygen) environments. The results reveal two distinct degradation pathways. Aerobic aging generates strongly polar byproducts, primarily formaldehyde and water, which increase orientational polarization and induce severe low-frequency dispersion (LFD) through hydrogen-bonded molecular clusters. In stark contrast, anaerobic aging yields non-polar low-molecular-weight siloxanes via a main-chain unzipping mechanism, which have a negligible effect on the dielectric properties. This work establishes a direct correlation between the chemical nature of degradation byproducts and dielectric performance, identifying oxygen as the critical factor. Therefore, hermetic sealing to exclude oxygen is an effective strategy to mitigate the dielectric degradation of silicone gels in high-temperature applications.