What are they?
Another teacher, generally a more experienced one, sits in and watches your lesson. Sometimes it is planned, and they may ask you to give them a lesson plan or a brief description of what they’re going to cover, or it may be a surprise visit. The person almost never gets involved in the class – they will probably take notes to help themselves remember. Often, you can ask them to focus on some particular aspect (say, your instructions or classroom management), or even a problem student.
Why do they do it?
They generally (or at least ideally!) offer truly constructive feedback! It can be a gigantic reassurance, especially as a new teacher, to get confimation that you are not screwing up. Of course, they do also want to monitor you and there is the added advantage that students see it and realize the school takes their class seriously.
Why are they nervewracking?
Well, besides the obvious that anyone who realizes someone is watching them to check how well they are doing their job might be a little tense, teachers often work “alone” in the sense that their colleagues don’t really see them. It’s quite a contrast from never having a colleague see you in action to being the focus of attention of one for an hour or so. Also, watching someone take notes can leave you wondering what they are writing about you.
Being new to teaching makes this easier though, I think. I was nervous during my CELTA knowing that five other candidates and a teacher trainer were watching me…but of course so were the students (watching me)and to me it was quite similar; this transitioned nicely into my first year. I think for people who are used to having near total autonomy (as most teachers do), being observed is even harder. Overall though, being observed is useful because a) 99% of the time you will just be able to confirm you are doing find and b) either way there is the potential for constructive feedback so you can improve.