Where and how does observer mode work?

I've heard it mentioned, but never seen it work.

But I could be mixing it up with something else

Observer mode is for muliplayer use. When you play online, if the option has been allowed, you can use observer mode to watch the other players.

Thank you.

Thru a [selected?] mechs cockpit, or from some selected position? Can it be changed during a game?

I can find very little on this subject, and have no idea of the specifics.

You can orbit above any individual in the game. While in observer mode you can use your fire button to switch between players, your movement controls to orbit around players and your throttle to zoom in and out on selected players.

So how much does this affect the players?

I know about 'join lag', so will my observing make that much of a difference if I stay logged in till the end of the match?