Observational methods are important in the measurement of vaccine effectiveness (VE) as experimental designs cannot be used for measurement of vaccines already on the vaccination schedule. Furthermore, efficacy measured in clinical trials under ideal conditions may differ to effectiveness in the field under non-ideal conditions and in different populations. In addition to post-licensure surveillance, observational VE studies are particularly important when disease incidence does not predictably decrease with increased vaccine coverage, when high proportions of vaccine failure among reported cases suggest a problem with the vaccine or when issues arise that were not predicted in pre-licensure evaluations. Commonly used study types for evaluating VE include cohort studies, household contact studies, case-control studies, the screening method and case-cohort studies. There are many potential biases in all observational VE studies which should be considered in the study design and analysis stage. Of the five observational study types reviewed, cohort studies undertaken during an outbreak investigation offer the simplest means of VE estimation and is the preferred study design where the situation permits. Where this is not possible the screening method is the most economical and rapid method. It is essential that the effectiveness of all vaccination programs be evaluated. As new vaccines are introduced to the schedule, booster doses are added and the timing of doses changed, the role of observational methods in the evaluation of VE will become even more important. To date, few observational VE studies have been undertaken in Australia, suggesting the under-utilisation of these methods.