Think of a chunk of crystalline solid. The atoms inside this solid are very ordered, and as such, if there is any small movement or vibration of the atoms, it will propagate as waves. This vibration will have different frequencies/wavelengths and energies associated with it. In quantum mechanics, the energy of waves are discrete and a phonon is just a fancy way of describing one unit of energy of a vibration at a particular frequency/wavelength. At room temperature, you will have many of these waves or phonons in a crystalline solid due to the atoms vibrating a lot.

It means measurement, although I have almost never seen "observation" used in scientific work other than when talking about the philosophy of quantum theory. A photodetector detecting a photon is a measurement, as an example.