Observing children is a task teachers and caregivers perform to understand the unique characteristics of each child. Observation alone can be helpful, but in combination with record keeping it becomes a valuable aid to understanding child development and can be used as a basis for making decisions about appropriate experiences to foster each child's development. This booklet offers guidelines for observation and record keeping in early childhood settings. It examines the reasons for observing children, the value of observation skills and good records, and ethical considerations. Tips on how to gather information about children are briefly outlined. Three types of observation methods discussed in detail are: (1) anecdotes, the complete record of an incident from beginning to its natural conclusion related in the past tense; (2) running records, a narrative or continuous recording of everything a child says and does within a unit of time; and (3) checklists, including developmental checklists, skill checklists, and program checklists. Each method is described, and examples or sample records for each method are included. Decoding, the process of analyzing the recorded data, is discussed, along with summary writing. Examples of decoding and a summary are included. Each section of the booklet includes references. (TJQ)