Congratulations on being given this opportunity. It might seem nerve-racking at the moment but I'm sure you'll enjoy the experience. It's a good career move for you and your employer obviously believes in your ability to do the job.
Before the observation, try to get hold of an evaluation grid. Your school might have one. If not, you can draw up a checklist yourself. Divide your checklist into categories such as: classroom management, checking of comprehension, interaction with students, use of materials, etc. You can have sub-categories under each heading. While you're observing you can take notes and use them to give grades for items on your checklist. If you don't like giving grades, write comments in each category.
Before the observation, talk to the teacher. Give them time to explain their aims and how they are going to handle the lesson. Ask them if there is anything in particular they want you to focus on. By asking this question, you allow them some control of the observation. It also becomes developmental from the teacher's point of view. It is no longer merely a test of competence.
During the observation, keep quiet and do not intervene. Try to be as unobtrusive as possible. If the teacher asks you to take part in an activity, participate fully. Remember it is the teacher's lesson.
After the lesson, write up your notes and consider how you are going to present your feedback. Give your feedback 24 hours after the observation, to allow both of you time for reflection. It's a good idea to allow the teacher to start talking. Allow them to describe what they think worked well and not so well. If they identify weaknessses, allow them to describe how it could have been handled differently, (focus on how things could have been different, not better). Remember to always include positive comments about the lesson and make suggestions for further reading or ways to work on a skill. Don't feedback on every negative point you spotted; choose 2 or 3 that really stand out. Most of all, approach the exercise in a postive way!