Service mesh technologies can enhance observability and security in cloud-native applications. Observability involves monitoring an app's state and determining what happened when something goes wrong. Key metrics include latency, traffic, errors, and saturation. Distributed tracing helps identify the flow of requests through the service mesh by adding a unique trace header to each request. Service meshes can protect communications between pods using mutual TLS, which ensures secure data transmission and identity verification for service proxies. This enables network segmentation based on service proxy identities, enhancing security in microservice architectures.