Let me explain what I mean by observer dependence in somewhat more length.The main reference is
http://arxiv.org/abs/0811.0900 . There is also a sequel with one number higher, but I am rather unhappy with that paper and will write a better one once I manage to assemble enough motivation.
The introduction of observer dependence amounts to little more than making a Taylor expansion of all fields. The point is that a Taylor series
f(x) = sum_m 1/m! f_m (x-q)^m
depends not only on the Taylor coefficients f_m, but also on the expansion point q, i.e. the observer's position. To each function f(x) we can associate many Taylor series, parametrized by q, whereas the function defined by the Taylor series is unique in good cases. The Taylor coefficients for different base points are of course related, but to make a Taylor expansion we must commit some definite base point. It then makes sense to talk about *the* observer carrying *the* clock, etc.
To quantize a Taylor series we introduce some dynamics for the observer's position. This adds some terms to the Lagrangian, and it is here that the observer's charge e enters. In particular, the observer decouples from the field dynamics if e = 0. The crucial novelty is that the Taylor coefficients f_m are the components of field measured relative to the observer's position, which is subject to quantum fluctuations. If
p = Mv
denote the (non-relativistic) observer's momentum, mass and velocity, Heisenberg tells us that
[q, v] = i hbar/M.
If the observer measures her position at some instant, she does not have a clue were she is at the next instant, because her velocity must be completely unknown.
There are two ways to avoid this quantum uncertainty:
1. Set hbar = 0. This gives classical physics e.g. GR.
2. Set M = infinity. This gives QFT
If we keep M nonzero and finite, and consider GR in this setup, there are again two limits:
1. hbar = 0. This describes GR coupled to a point particle with mass M.
2. Newton's constant G = 0. This should describe QFT with M as the cut-off scale. Because the observer's mass is infinite in QFT, all relevant energies must be much smaller than M, including the energy of virtual quanta. Hence M acts as a cut-off.
This makes it very clear why GR and QFT are mutually incompatible: if we let the cut-off scale M to infinity, the observer will interact with gravity and collapse into a black hole. Not good! To my knowledge, this is by far the most intuitive argument why QFT has big problems specifically with GR.
There is a web of interconnections between three crucial concepts in quantum gravity: locality, diff anomalies, and observer dependence.
1. Locality.
Classical GR is a local theory, and so is QFT (in an appropriate sense). What is happening here and now should be best described in terms of local data, and not e.g. in terms of data living on some holographic screen outside our visible dS universe. However, theorems (LOST and others) state that nontrivial correlation functions are incompatible with the space-time diffeomorphism symmetry of GR. This no-go theorem can be evaded by quantum mechanical breaking of this symmetry, i.e. by
2. Diff anomalies.
Contrary to popular belief, a gauge anomaly does not automatically render a theory inconsistent. What it does is to turn a classical gauge symmetry into a quantum global symmetry, which acts on the Hilbert space rather than reducing it. This may or may not be consistent, depending on whether this action is unitary. The diff anomalies relevant to quantum gravity generate a higher-dimensional generalization of the Virasoro algebra, which was discovered almost 20 years ago. It is not possible to construct representations of this algebra using the fields themselves, because such attempts leads to non-sensical infinities.
3. Observer dependence.
Instead, off-shell representations of the multi-dimensional Virasoro algebra can be built from space-time trajectories in the space of Taylor series. The relevant extensions are functionals of the observer's trajectory (the time evolution of the observer's position), and can hence not arise in QFT, where the observer is never introduced. This is in accordance with a theorem that asserts that there are no diff anomalies in 4D in QFT.
Hence we see that locality, diff anomalies, and observer dependence are closely related. You can not have one in quantum gravity without buying the whole package.