when thinking about observation in quantum mechanics, just think of it as extracting information through special tools, in some cases these tools may be photo detectors or cameras, anything that can aid in gaining insight to where the photons are going. as for why the observation of photons collapses the wave function, it’s simply the act of observing or measuring that is doing so, as of to how and why the photons “decide” to act like particles and collapse the wave-function when being observed is a great question, unsolved, up for debate and no consensus has been reached.
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