Observational error refers to mistakes or inaccuracies that occur when someone is observing or gathering information. It means that the person might make a wrong or flawed observation, leading to incorrect or unreliable data. Full definition
In observational error, you've omitted the biggest one: the sample isn't a representation of the population. (realclimate.org)
This approach allows us to neglect observational errors and model biases, and is therefore referred to as the perfect modeling framework. (link.springer.com)
Observational errors on any one annual mean temperature anomaly estimate are around 0.1 deg C, and the errors from the linear fits are given in the text. (realclimate.org)