Participant observation is a research method that is often used in cultural anthropology and ethnography. It relies on the accounts and observations of an individual who lives in the culture that is being studied and immerses themselves within that society.
For instance, an anthropologist wishes to study a tribe which lives in the Amazon Jungle. To this end they go to live with this tribe for a period of time and in doing so participates in their lifestyle and learns their language, rituals, history, folklore, hunting/farming methods, etc. An example of this is the landmark study done by Margaret Mead in the 1930's entitled Coming of Age in Samoa.