Magento has been programmed to use Event-Observer methodology and can raise events in crucial areas of the flow.

Observer is the event handler and it allows us to add our own logic in adition to the core logic without modifying the core code .

Event:  An Event is something that occurs in a certain place during a particular sequence flow.

Observer :   An Observer is an event handler. It listens to any event it is attached to and accordingly reacts to the event.