I just thought of a quick analogy. I've blogged on this subject before, explaining God's all knowing-ness in rather scientific and using imagery from physics terminology. I thought of another analogy that is less "clinical" and probably more comfortable for day to day contemplation.
This modern generation, full of guilty consciences and much to hide, ha, is not comfortable with the thought of an all knowing God. Ancient humans found that reassuring and so Biblical souls had comfort in knowing that God knew all that they did moment by moment, largely because they were more natural and less self conscious than people today. People today ask astronauts (cosmonauts) and God similar things, worrying about going to the bathroom, sex and so forth. In other words, privacy in modern times has been polarized into exhibitionism and its opposite, unfounded shame in natural functions. Thus modern people are uncomfortable at thinking about an all knowing God, differing from previous generations by far.
So here is an analogy that will help with this discomfort. Do not think of God as the "eye in the sky" or using a visionary means, since it's not even theologically or physically accurate anyway. Remember that God created humans, the universe, and is present among people as the Holy Spirit, who moves among all people like the wind, or the water. So it would be accurate and perhaps more comforting to think of God's all knowness as being like the air that is breathed, oxygenates the body, and is expelled, moving in constant cycle through the bodies of the living and also among the landscape's features. It is not so much that the air is "watching" anyone, but the air obviously knows how it is being used. So it's not like God is looking with eyes when someone tells a lie, for example, but God knows about the lie because the lie is spoken with air, and air is present throughout all everywhere.
Or think of God's all knowing as being like invisible water that flows among and through all. When one's heart is hard and one sins or is uncharitable, it is like a rock being put into place (we could make a pun that it is like a dam, ha) and the water must move around the rock, so obviously the water "notices." It's not like the water is "watching" at that moment, but the water is shaped by all that one does and thinks. Later when one is in God's presence and judged, he knows all that you have done because his spirit moved, like air or water among you all, and retains the shape of one's thoughts and deeds, and how one has lived one's life.
It is also more accurate because God is interactive on an individual basis, not just "the observer." Through the Holy Spirit God constantly tries to inspire people to be loving, kind, righteous, strong and hating of sin. So the Holy Spirit is like a warm wind that blows when one is cold, or a cool breeze that blows when one is hot, or water that flows, either impeded or unimpeded, according to one's own actions. It is thus a more accurate way to describe God's all knowingness than to think of him as the constant judging observer of one's every deed.
I hope that is a helpful pointer to a less clinical description of how God knows all.