What is the difference between monitoring and observability?

Monitoring is the active state of things and alerts. A dashboard can show you the state of components and the system as a whole. Working, impaired or failed. Observability is where you gather further evidence such as logs and metrics. This information enables you to track down the root cause of the monitoring alerts and fix it. It is sometimes used as an early warning system. As an example; a disk usage metric can enable you to extrapolate ongoing disk usage and plan for upgrades.

A concrete example: a dashboard showing "API error rate: 12%" is monitoring. Being able to trace that 12% down to a specific downstream database connection pool exhausting on a specific node, using logs and traces, is observability.