The TARDIS is placing a perception filter around itself. So the people can see it, but they won't notice it. They're just not paying any attention. This explains why people explicitly looking for it can also find it. The perception filter is working very subtle. It was mentioned couple of times in the newer seasons, but I can't find a quote right now.
This is also mentioned in the first episode of Torchwood, where they leave their base with an elevator in the middle of a big open place.
(The slab slots into place in the pavement. People are walking in the open air.)
GWEN: But, but they can see the lift. Why aren't they? I mean, we are right out in the open. They can see everything.
JACK: Do they look like they can see us?
GWEN: No, but look at us. We couldn't be any more public.
JACK: Hello! Hey, you there, hello!
(The man doesn't take his eyes off his mobile phone.)
JACK: It's called a perception filter. He can sort of see us, but we don't quite register. Just like something in the corner of your eye. It only works on this exact spot. Step off.
(Jack steps off and speaks to a lady.)
JACK: Hi! Nice night.
(She looks at him and walks on.)
JACK: Oh. And lo, we are perceived.
GWEN: How does it work?
JACK: No idea. We know how to use it, not how it happens. But if I were to guess, I'd say that there was once a dimensionally transcendental chameleon circuit placed right on this spot which welded its perception properties to a spatio-temporal rift. But that sounds kind of ridiculous. Invisible lift has got more of a ring to it, don't you think?
GWEN: But hold on. If no one can see it when the lift's coming up, there's a bloody big hole in the floor. Don't people fall in?
JACK: That is so Welsh.
GWEN: What is?
JACK: I show you something fantastic. You find fault.