Observations are one of the tools and techniques for the PMI process to collect requirements (see section 22.214.171.124 of the PMBOK, 5th edition). Specifically the PMBOK recommends using this technique to gather requirements related to how experts do their work, which is also called "shadowing" sometimes.
Note: Raw observations are also part of work performance data, although they are not mentioned as a tool or technique for that process in the PMBOK. Observations may be useful in other parts of management, operations, and projects as well. For instance, observations are useful in product testing.
Related: observation and conversation