Background Qualitative observational methods are an effective means of detailing social processes and phenomena that constitute the day-to-day reality of practice in rehabilitation units. Of vital importance in this approach is the need to record and analyse fieldnotes in sufficient detail, to ensure the researchers' explanations of particular processes or events are an accurate and credible representation of those phenomena. Content In this second article, the process of participant observation is discussed, and the approaches to recording fieldnotes and working with qualitative observational data are described with illustrative examples. These examples also serve to highlight three principles that researchers should pay attention to when developing fieldnote records. Conclusions Participant observation allows the researcher to gain access to and develop understanding of what the social and occupational world feels and looks like to those who work in rehabilitation. For observational data to be comprehensive and address the research questions posed, the context and organization of social settings as well as phenomena of particular interest should be captured as fully as possible. A considered and rigorous approach to recording and analysing fieldnotes will ensure this is achieved.