Observability is the ability to measure and understand the internal state of a system based on the data it produces. It involves collecting metrics, logs, and traces to gain insights into how a system is performing. This helps teams identify issues, optimize performance, and ensure reliability. In software development, observability is crucial for monitoring applications and infrastructure. Tools like Prometheus, Grafana, and ELK Stack are commonly used to visualize and analyze data. By implementing observability practices, organizations can improve their response to incidents and enhance overall system health.