In order to understand why observation of our thoughts and actions is necessary, you must first realize that you are not completely awake. Your daily life is mainly controlled by learned expressions, mannerisms and reactions. From childhood we learn to copy our parents and other people who have an influence in our lives.
You are highly predictable and much like a copy of others. The personality adopts these attitudes which are best described as multiple "I's". Although you feel like a single person with a unique personality, you are composed of the many different I's that you've adopted over time.
How can we be awake and express our uniqueness and creativity when we've learned to simply copy others and adopt these attitudes? You're mostly just reacting through your day, and little is unique about that.
Observation comes in as a way for us to notice our I's - unconscious and automatic motions. All these multiple I's that plague our mind throughout our day can be eliminated through observation.
By first becoming aware that you are asleep, you can observe your thoughts and actions and better understand them. Understanding is all that is needed as judgement or challenging them can further create distress which will not benefit us.
That which observes is a permanent state of our being within that never changes or ages. It is always with us and has been for as long as we can remember.
As we've been reminded before, become aware of this observer and allow it to watch, and create that awareness of the behavior of your mind and personality, and you will begin to change within, waking up to the beauty and brilliance of your Light.