Observational drawing is exactly what it sounds like: drawing via observation. By simply looking at the subject and drawing what is presented to the eye, the art student gains solid perceptual skills and hand-eye coordination, as well as eliminating flawed preconceptions about the appearance of objects.
One popular exercise in observational drawing is contour drawing. Students performing this exercise are made to look at the subject and keep it constantly in view without looking down at the drawing in progress. It is intended to make sure that the student is relying on observation, rather than attempting to keep an image in memory. Over time, the student will get better at maintaining proportion without having to look at the drawing. This is especially useful when attempting to draw subjects that might be moving.
To be able to recognize lines, curves, edges, perspective, hues, values and to be able to translate them to paper are important in observational drawing. Perspective is the orientation of the subject relative to the viewer and hue is the color. Value refers to the spectrum of light and shade, ranging from white to black through a greyscale. Accurately rendering these qualities gives the drawing the illusion of dimension.