Replicating others’ novel behavior through observation and imitation; also known as vicarious learning, modeling, or social learning. This theory was proposed by Albery Bandura.
Basically, to learn in an observational manner someone must notice something someone else is doing, remember it or record it in their mind, and finally replicate the behavior. The behavior may or may not happen again. The choice to continue exhibiting the behavior depends on the outcome (positive or negative, reward etc). The only things that limit this type of learningÂ are the intelligence level and the level of ability to copy the person well that the learner possesses.
Example: In a famous experiment, social psychologist Al Bandura showed young children a video of a woman hitting and kicking an inflatable “Bobo” doll. When left alone with a similar doll, children copied the woman’s aggressive gestures.
I think this site demonstrates the ideas of social learning theory/observational learning theory quite well: http://psychology.about.com/od/developmentalpsychology/a/sociallearning.htm