Spotter

Artillery observers are exactly what it says on the tin (well, uniform): Forward observers for mortar batteries. When they appear, they start taking down your coordinates and then fling a high visibility flare to guide artillery fire. If the flare isn't put out in time, you get treated to a not-so-nice display of fireworks celebrating your accomplishments (with complimentary shrapnel ventilating you).

Tactics
By themselves, observers are hardly a threat. They don't have weapons, hanging back in an isolated spot and calling down artillery strikes. Extinguishing the flare (approaching and interacting with it) will prevent the artillery strike. The permanent method is to find the observer and treat him to a nice leaden gift by way of rifle.