The author's excellent 'powers of observation' [=ability to notice and pay close attention to things] are evident in the book's detailed descriptions.
The plants seem to have recovered from the disease, but they are still 'under observation'. [=someone is watching them carefully]
They're keeping him at the hospital 'for observation' [=so that doctors can watch him carefully] for another few days.
(..) Wave good-bye. You're that graffiti kid, aren't you? I guess. You really messed up our observation area. Sorry. You like whales? Well, he doesn't like anybody, So you be careful (..)1993 Free Willy