Distant objects if it still works in the current version renders objects beyond the local “box”. It has next to zero impact on performance, and makes everything so more amazing, as you can also see your own stations and debris from far away. It makes the space really dark if there is a light source, but wonderfully mesmerizing when Kerbol is hidden.
I don’t remember where the observatory was, but I think it may have been one of those extra parts pack. It wasn’t really practical, nor very realistic (you can look at objects with an insane resolution through your lens after all: a blurry mod would have made it even more perfect ;)
I don’t have my PC at hand to search for the name for it, but I bet there must be a couple of them around by now!