diff --git a/src/primaite/game/agent/observations/software_observation.py b/src/primaite/game/agent/observations/software_observation.py
index eae9dc1f..ff61714a 100644
--- a/src/primaite/game/agent/observations/software_observation.py
+++ b/src/primaite/game/agent/observations/software_observation.py
@@ -69,3 +69,95 @@ class ServiceObservation(AbstractObservation):
         :rtype: ServiceObservation
         """
         return cls(where=parent_where + ["services", config["service_name"]])
+
+
+class ApplicationObservation(AbstractObservation):
+    """Observation of an application in the network."""
+
+    default_observation: spaces.Space = {"operating_status": 0, "health_status": 0, "num_executions": 0}
+    "Default observation is what should be returned when the application doesn't exist."
+
+    def __init__(self, where: Optional[Tuple[str]] = None) -> None:
+        """Initialise application observation.
+
+        :param where: Store information about where in the simulation state dictionary to find the relevant information.
+            Optional. If None, this corresponds that the file does not exist and the observation will be populated with
+            zeroes.
+
+            A typical location for a service looks like this:
+            `['network','nodes',<node_hostname>,'applications', <application_name>]`
+        :type where: Optional[List[str]]
+        """
+        super().__init__()
+        self.where: Optional[Tuple[str]] = where
+
+    def observe(self, state: Dict) -> Dict:
+        """Generate observation based on the current state of the simulation.
+
+        :param state: Simulation state dictionary
+        :type state: Dict
+        :return: Observation
+        :rtype: Dict
+        """
+        if self.where is None:
+            return self.default_observation
+
+        app_state = access_from_nested_dict(state, self.where)
+        if app_state is NOT_PRESENT_IN_STATE:
+            return self.default_observation
+        return {
+            "operating_status": app_state["operating_state"],
+            "health_status": app_state["health_state_visible"],
+            "num_executions": self._categorise_num_executions(app_state["num_executions"]),
+        }
+
+    @property
+    def space(self) -> spaces.Space:
+        """Gymnasium space object describing the observation space shape."""
+        return spaces.Dict(
+            {
+                "operating_status": spaces.Discrete(7),
+                "health_status": spaces.Discrete(6),
+                "num_executions": spaces.Discrete(4),
+            }
+        )
+
+    @classmethod
+    def from_config(
+        cls, config: Dict, game: "PrimaiteGame", parent_where: Optional[List[str]] = None
+    ) -> "ApplicationObservation":
+        """Create application observation from a config.
+
+        :param config: Dictionary containing the configuration for this service observation.
+        :type config: Dict
+        :param game: Reference to the PrimaiteGame object that spawned this observation.
+        :type game: PrimaiteGame
+        :param parent_where: Where in the simulation state dictionary this service's parent node is located. Optional.
+        :type parent_where: Optional[List[str]], optional
+        :return: Constructed service observation
+        :rtype: ApplicationObservation
+        """
+        return cls(where=parent_where + ["services", config["application_name"]])
+
+    @classmethod
+    def _categorise_num_executions(cls, num_executions: int) -> int:
+        """
+        Categorise the number of executions of an application.
+
+        Helps classify the number of application executions into different categories.
+
+        Current categories:
+        - 0: Application is never executed
+        - 1: Application is executed a low number of times (1-5)
+        - 2: Application is executed often (6-10)
+        - 3: Application is executed a high number of times (more than 10)
+
+        :param: num_executions: Number of times the application is executed
+        """
+        if num_executions > 10:
+            return 3
+        elif num_executions > 5:
+            return 2
+        elif num_executions > 0:
+            return 1
+        return 0
diff --git a/src/primaite/simulator/file_system/folder.py b/src/primaite/simulator/file_system/folder.py
index 3ddc1e5f..529bfe11 100644
--- a/src/primaite/simulator/file_system/folder.py
+++ b/src/primaite/simulator/file_system/folder.py
@@ -130,7 +130,7 @@ class Folder(FileSystemItemABC):
                     file = self.get_file_by_id(file_uuid=file_id)
                     file.scan()
                     if file.visible_health_status == FileSystemItemHealthStatus.CORRUPT:
-                        self.visible_health_status = FileSystemItemHealthStatus.CORRUPT
+                        self.health_status = FileSystemItemHealthStatus.CORRUPT
                 self.visible_health_status = self.health_status
 
     def _reveal_to_red_timestep(self) -> None:
diff --git a/tests/integration_tests/game_layer/observations/__init__.py b/tests/integration_tests/game_layer/observations/__init__.py
new file mode 100644
index 00000000..e69de29b
diff --git a/tests/integration_tests/game_layer/observations/test_file_system_observations.py b/tests/integration_tests/game_layer/observations/test_file_system_observations.py
new file mode 100644
index 00000000..808007cc
--- /dev/null
+++ b/tests/integration_tests/game_layer/observations/test_file_system_observations.py
@@ -0,0 +1,68 @@
+import pytest
+from gymnasium import spaces
+
+from primaite.game.agent.observations.file_system_observations import FileObservation, FolderObservation
+from primaite.simulator.network.hardware.nodes.host.computer import Computer
+from primaite.simulator.sim_container import Simulation
+
+
+@pytest.fixture(scope="function")
+def simulation(example_network) -> Simulation:
+    sim = Simulation()
+
+    # set simulation network as example network
+    sim.network = example_network
+
+    return sim
+
+
+def test_file_observation(simulation):
+    """Test the file observation."""
+    pc: Computer = simulation.network.get_node_by_hostname("client_1")
+    # create a file on the pc
+    file = pc.file_system.create_file(file_name="dog.png")
+
+    dog_file_obs = FileObservation(
+        where=["network", "nodes", pc.hostname, "file_system", "folders", "root", "files", "dog.png"]
+    )
+
+    assert dog_file_obs.space == spaces.Dict({"health_status": spaces.Discrete(6)})
+
+    observation_state = dog_file_obs.observe(simulation.describe_state())
+    assert observation_state.get("health_status") == 1  # good initial
+
+    file.corrupt()
+    observation_state = dog_file_obs.observe(simulation.describe_state())
+    assert observation_state.get("health_status") == 1  # scan file so this changes
+
+    file.scan()
+    file.apply_timestep(0)  # apply time step
+    observation_state = dog_file_obs.observe(simulation.describe_state())
+    assert observation_state.get("health_status") == 3  # corrupted
+
+
+def test_folder_observation(simulation):
+    """Test the folder observation."""
+    pc: Computer = simulation.network.get_node_by_hostname("client_1")
+    # create a file and folder on the pc
+    folder = pc.file_system.create_folder("test_folder")
+    file = pc.file_system.create_file(file_name="dog.png", folder_name="test_folder")
+
+    root_folder_obs = FolderObservation(
+        where=["network", "nodes", pc.hostname, "file_system", "folders", "test_folder"]
+    )
+
+    observation_state = root_folder_obs.observe(simulation.describe_state())
+    assert observation_state.get("FILES") is not None
+    assert observation_state.get("health_status") == 1
+
+    file.corrupt()  # corrupt just the file
+    observation_state = root_folder_obs.observe(simulation.describe_state())
+    assert observation_state.get("health_status") == 1  # scan folder to change this
+
+    folder.scan()
+    for i in range(folder.scan_duration + 1):
+        folder.apply_timestep(i)  # apply as many timesteps as needed for a scan
+
+    observation_state = root_folder_obs.observe(simulation.describe_state())
+    assert observation_state.get("health_status") == 3  # file is corrupt therefore folder is corrupted too
diff --git a/tests/integration_tests/game_layer/observations/test_node_observations.py b/tests/integration_tests/game_layer/observations/test_node_observations.py
new file mode 100644
index 00000000..835202c6
--- /dev/null
+++ b/tests/integration_tests/game_layer/observations/test_node_observations.py
@@ -0,0 +1,43 @@
+import copy
+from uuid import uuid4
+
+import pytest
+
+from primaite.game.agent.observations.node_observations import NodeObservation
+from primaite.simulator.network.hardware.nodes.host.computer import Computer
+from primaite.simulator.sim_container import Simulation
+
+
+@pytest.fixture(scope="function")
+def simulation(example_network) -> Simulation:
+    sim = Simulation()
+
+    # set simulation network as example network
+    sim.network = example_network
+
+    return sim
+
+
+def test_node_observation(simulation):
+    """Test a Node observation."""
+    pc: Computer = simulation.network.get_node_by_hostname("client_1")
+
+    node_obs = NodeObservation(where=["network", "nodes", pc.hostname])
+
+    observation_state = node_obs.observe(simulation.describe_state())
+    assert observation_state.get("operating_status") == 1  # computer is on
+
+    assert observation_state.get("SERVICES") is not None
+    assert observation_state.get("FOLDERS") is not None
+    assert observation_state.get("NETWORK_INTERFACES") is not None
+
+    # turn off computer
+    pc.power_off()
+    observation_state = node_obs.observe(simulation.describe_state())
+    assert observation_state.get("operating_status") == 4  # shutting down
+
+    for i in range(pc.shut_down_duration + 1):
+        pc.apply_timestep(i)
+
+    observation_state = node_obs.observe(simulation.describe_state())
+    assert observation_state.get("operating_status") == 2
diff --git a/tests/integration_tests/game_layer/observations/test_observations.py b/tests/integration_tests/game_layer/observations/test_observations.py
new file mode 100644
index 00000000..eccda238
--- /dev/null
+++ b/tests/integration_tests/game_layer/observations/test_observations.py
@@ -0,0 +1,35 @@
+import pytest
+
+from primaite.game.agent.observations.observations import NicObservation
+from primaite.simulator.network.hardware.nodes.host.computer import Computer
+from primaite.simulator.network.hardware.nodes.host.host_node import NIC
+from primaite.simulator.sim_container import Simulation
+
+
+@pytest.fixture(scope="function")
+def simulation(example_network) -> Simulation:
+    sim = Simulation()
+
+    # set simulation network as example network
+    sim.network = example_network
+
+    return sim
+
+
+def test_nic(simulation):
+    """Test the NIC observation."""
+    pc: Computer = simulation.network.get_node_by_hostname("client_1")
+
+    nic: NIC = pc.network_interface[1]
+
+    nic_obs = NicObservation(where=["network", "nodes", pc.hostname, "NICs", 1])
+
+    observation_state = nic_obs.observe(simulation.describe_state())
+    assert observation_state.get("nic_status") == 1  # enabled
+    assert observation_state.get("nmne") is not None
+    assert observation_state["nmne"].get("inbound") == 0
+    assert observation_state["nmne"].get("outbound") == 0
+
+    nic.disable()
+    observation_state = nic_obs.observe(simulation.describe_state())
+    assert observation_state.get("nic_status") == 2  # disabled
diff --git a/tests/integration_tests/game_layer/observations/test_software_observations.py b/tests/integration_tests/game_layer/observations/test_software_observations.py
new file mode 100644
index 00000000..17fc386f
--- /dev/null
+++ b/tests/integration_tests/game_layer/observations/test_software_observations.py
@@ -0,0 +1,66 @@
+import pytest
+
+from primaite.game.agent.observations.software_observation import ApplicationObservation, ServiceObservation
+from primaite.simulator.network.hardware.nodes.host.computer import Computer
+from primaite.simulator.sim_container import Simulation
+from primaite.simulator.system.applications.database_client import DatabaseClient
+from primaite.simulator.system.applications.web_browser import WebBrowser
+from primaite.simulator.system.services.ntp.ntp_server import NTPServer
+
+
+@pytest.fixture(scope="function")
+def simulation(example_network) -> Simulation:
+    sim = Simulation()
+
+    # set simulation network as example network
+    sim.network = example_network
+
+    return sim
+
+
+def test_service_observation(simulation):
+    """Test the service observation."""
+    pc: Computer = simulation.network.get_node_by_hostname("client_1")
+    # install software on the computer
+    pc.software_manager.install(NTPServer)
+
+    ntp_server = pc.software_manager.software.get("NTPServer")
+    assert ntp_server
+
+    service_obs = ServiceObservation(where=["network", "nodes", pc.hostname, "services", "NTPServer"])
+
+    observation_state = service_obs.observe(simulation.describe_state())
+
+    assert observation_state.get("health_status") == 0
+    assert observation_state.get("operating_status") == 1  # running
+
+    ntp_server.restart()
+    observation_state = service_obs.observe(simulation.describe_state())
+    assert observation_state.get("health_status") == 0
+    assert observation_state.get("operating_status") == 6  # resetting
+
+
+def test_application_observation(simulation):
+    """Test the application observation."""
+    pc: Computer = simulation.network.get_node_by_hostname("client_1")
+    # install software on the computer
+    pc.software_manager.install(DatabaseClient)
+
+    web_browser: WebBrowser = pc.software_manager.software.get("WebBrowser")
+    assert web_browser
+
+    app_obs = ApplicationObservation(where=["network", "nodes", pc.hostname, "applications", "WebBrowser"])
+
+    web_browser.close()
+    observation_state = app_obs.observe(simulation.describe_state())
+    assert observation_state.get("health_status") == 0
+    assert observation_state.get("operating_status") == 2  # stopped
+    assert observation_state.get("num_executions") == 0
+
+    web_browser.run()
+    web_browser.scan()  # scan to update health status
+    web_browser.get_webpage("test")
+    observation_state = app_obs.observe(simulation.describe_state())
+    assert observation_state.get("health_status") == 1
+    assert observation_state.get("operating_status") == 1  # running
+    assert observation_state.get("num_executions") == 1