This review examines evidence for the utility and validity of direct observational techniques for answering particular research and clinical questions. Observational techniques often involve recording behavior in settings that are relatively unnatural for families. However, it is argued that construct validity of observational methods depends partly on whether the findings are representative of participants' typical everyday behavior. Evidence is reviewed concerning whether observational findings are affected by the presence of the observer, and by two factors which have been neglected in the literature, namely the type of task imposed by the observer (e.g., directing parent and child to play rather than observing spontaneous interaction) and the location of the observations (e.g., clinic or laboratory rather than home). The review suggests that the presence of an observer does not necessarily distort the nature of interactions. However, the small number of studies in this area suggest that interactions in structured or artificial settings are not necessarily representative of those normally taking place at home.