Whether keeping track of live cards or watching players for reads, it is important to engage your observational skills at all times when playing. Even if you're not in the hand, you can spot things that you can use later. Just this evening I cashed in a tournament at Running Aces. After folding a hand, I watched a battle between the small blind and the big blind where I didn't think the small blind had anything. I saw that a small muscle in his cheek was twitching when he bet. Luckily he was called and I was able to see that he was, in fact, bluffing. Later, I saw him move in with no twitch and showed down a big hand: a pocket pair of Queens. I wasn't in either of these hands, but later on, I was able to resteal from him when he raised my blind in late position and his cheek was twitching. And later still, he shoved with a twitching cheek and I called him confidently with a pair of sixes.
Here's an article on some common tells to help you get started with your observations.