Heterogeneity and fractures significantly influence oil and gas migration. However, current research remains insufficient in clearly visualizing CO2 displacement mechanisms under such reservoir conditions. This study combines microscopic visualization experiments and numerical simulations to investigate three-phase flow characteristics during CO2 huff-n-puff, CO2 displacement, and water huff-n-puff in heterogeneous fractured reservoirs. The research elucidates the formation mechanism of residual oil and the characteristic of CO2 storage during huff-n-puff, and further illustrates the influences of soaking time and injection pressure. Results indicate that CO2 huff-n-puff significantly mitigates the adverse effects of heterogeneity. The primary cause of residual oil formation is insufficient displacement energy to overcome various flow resistances. CO2 primarily exists in pore throats as bubbles and is stored in dissolved form in the oil and water phases. As the soaking time and injection pressure increase, the proportion of continuous residual oil decreases noticeably, leading to a higher oil recovery factor. When the injection pressure exceeds the minimum miscible pressure (MMP), the diffusion coefficient of CO2 increases significantly. Moreover, the presence of vertical fractures effectively expands the diffusion range of CO2. These findings provide a theoretical basis for the applications of carbon dioxide enhanced oil recovery (CO2 EOR) and carbon capture, utilization, and storage (CCUS) technologies.