Awareness is a very internal process of noticing where your awareness is and what you are feeling within.
Observation is a very external process of detached watching the exterior environment or interior of self.
Observation is more detached and external than awareness which is a more of an internal and feeling journey.
If we spend too much time in one or the other we become unbalanced, with too much of an internal or external focus.
Balance is needed between awareness and observation.