The Collaborative International Dictionary of English v.0.48:

Observatory \Ob*serv"a*to*ry\, n.; pl. Observatories. [Cf. F.
   observatoire.]
   1. A place or building for making observations on the
      heavenly bodies.
      [1913 Webster]

            The new observatory in Greenwich Park. --Evelyn.
      [1913 Webster]

   2. A building fitted with instruments for making systematic
      observations of any particular class or series of natural
      phenomena.
      [1913 Webster]

   3. A place, as an elevated chamber, from which a view may be
      observed or commanded.
      [1913 Webster]

   4. (Mil.) A lookout on a flank of a battery whence an officer
      can note the range and effect of the fire; usually
      referred to as an observation post. --Farrow.
      [1913 Webster +PJC]

WordNet (r) 3.0 (2006):

observatory
    n 1: a building designed and equipped to observe astronomical
         phenomena
    2: a structure commanding a wide view of its surroundings [syn:
       lookout, observation tower, lookout station,
       observatory]

The Devil's Dictionary (1881-1906):

OBSERVATORY, n.  A place where astronomers conjecture away the guesses
of their predecessors.