Subscription refers to the operations that modify the behaviours of an IObservable<T> (e.g. Throttle, Merge, Concat) The IScheduler for the subscription phase is assigned by the SubscribeOn() method.
Observation refers to the callback operations that are invoked as the result of observing an IObservable<T> (e.g. OnNext, OnCompleted, OnError) The IScheduler for the observation phase is assigned by the ObserveOn() method.
While not the subject of this post, you can also choose an IScheduler implementation to convert any IEnumerable<T> to an IObservable<T> with the ToObservable method. This is relevant when the IEnumerable<T> has the potential to take a long time to be enumerated.