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Observation is clearly distinguished from experiments by the absence of any intervention. The method is often used in everyday social settings to observe behaviour 'naturalistically', but it is also sometimes used in laboratory settings (though often the reason for the latter setting is for careful control of experimental variables). Data can be both quantitative and qualitative, though most observation tends to involve the latter (see earlier section on qualitative observation under 'qualitative methods'). The data can be structured, and collected in terms of a pre-existing checklist, or unstructured, leaving observers free to write down their overall impressions in any way they see fit. It should be pointed out that even the 'unstructured' approach will still be affected by choices made by the observer to do with selection and construction (see 'construction of data' under 'qualitative methods'). However, 'unstructured observation' is essentially defined as not pre-structured in any way, leaving the observer free to pick up on whatever they think are salient issues, may be missed by more structured data.

One particular type of observational method is called participant observation, where a researcher will join in a particular group or social setting, participating in the activities of the group, usually without revealing they are a researcher. Because of its covert nature, this necessarily informal method of data collection raises significant ethical issues. However, it can be the source of very useful data. This approach has a number of factors in common with ethnographic methods (though with the latter, researchers are more likely to be open about what they are engaged in). A key ethical issue in observation in general in fact is that with naturalistic observation the 'participants' are usually unaware that they are being observed. However, if the participants know they are being observed, their behaviour may well change, so destroying the very natural behaviour the researcher wants to observe. This is analogous to the Heisenberg Uncertainty Principle in quantum physics, where bouncing light rays off an electron to find out its location will itself make the electron fly off somewhere else, which means you no longer know where it is! There are no simple answers to such dilemmas: researchers have to take decisions based on the particular research topic and setting they are looking at.