After an indefinite time, the observer stops working in the area it is in, it does not affect other areas. There's no point in taking it off and putting it back on, or leaving the world.
video on YouTube: https://youtu.be/bbYQWB8BE7s
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Thank you for your report!
We're tracking this issue in MCPE-150506, so this ticket is being resolved and linked as a duplicate.
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This happened in my server after a crash. I had to switch to a backup to fix it.