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Observation can be called as the process of gathering data and inference can be said to be a proces of taking decisions about the gathered data. Observation is careful watching of things around while inference is the conclusion drawn out of the careful watching :D

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Observation is using your senses namely sight, touch, hearing, tasting and smell so that you can collect facts and data about an event, person or whatever. Meanwhile inference is usually predicting or making a gguess towards the future. An example is how a substance will react when you combine it with a negatively chrged substance :)))
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