Season 2 - Episode 10 "Grey Matters"

When three different schizophrenic patients of a mysterious Dr. Paris, are each cured instantaneously during a break in at each of their own separate medical facilities, the team is called in to investigate. After reviewing the tapes at each scene they discover that one of the men, Thomas Jerome Newton, used to be a cryogenically frozen head that was stolen by the shapeshifters. Now with a name for their enemy, Olivia is hellbent on killing this man. But while searching for Newton, the team discovers that the patients each had a small portion of brain tissue implanted in their skulls. Each of these pieces were removed by Newton during the break-ins, but without a host, they are slowly dying. After coming up with very little leads on what Newton plans, we discover that the brain tissue belongs to Walter, and each piece contains a memory. Newton kidnaps Walter and temporarily reconnects the tissue, trying to discover how to open a door to the other universe. When Olivia and Peter arrive, they are able to save Walter, but they are not able to stop Newton from escaping. The tissue dies, and with it, Walter's memories of what has happened. The episode ends with a flashback to when Walter's brain tissue was removed. It is revealed that William Bell was Dr. Paris and that he had hidden the tissue in the three patients.

And where is the Observer? Well he is very hard to spot in this episode, so don't feel bad if you missed him. He is across the street from the washroom where they think Newton is keeping Walter. He is in the red box as always, so there should be no trouble for you to find him.

Season 2 - Episode 9 "Snakehead"

When a boat loaded with illegal Chinese immigrants sinks, fringe is called in to investigate the real cause of their deaths. A worm that has been known for its potential healing properties by the Chinese has been unknowingly implanted in these people and been allowed to grow. However, once the worms outgrow their hosts, the people are killed and the worms are then harvested for their lymph glands, which can cure any immune disease. With a second shipment of these people coming in, the team has to work fast before they are found by the triad gang who is behind this violation against nature. Meanwhile, Walter attempts to break free from his son but ends up accidentally getting Astrid hurt. Feeling terrible, Walter implants himself with a tracking device and gives Peter the transponder, so that he will not be lost.

And where is the Observer? Well he is very hard to find this time so don't feel to bad if you missed him. He is on screen for about 2 seconds when the man in the Chinese herb shop calls to have Walter and Astrid followed. He walks right past the camera so he is very blurry, but is still recognizable. You can see him below in the middle of the customary red box.