When an Observer eats, it is alway really spicy food. This seems to be a common characteristic of all Observers, since in the episode 8 of season 2 (August) they all put a lot of hot sauce in their meals.
In a quiet Indian-style restaurant, December and the Observer are joined by an associate, July, as they smother their meals with hot sauce.
Is there any reason for that?
The Observers are clearly detached from reality. They never show external emotion, and we've seen that they probably don't even experience time in a linear fashion.
But we've also seen that they aren't completely detached. August fell in love with Christine Hollis in the episode you mentioned. September, the Observer we're familiar with, clearly has an emotional attachment to Walter (after all, he didn't finally erase Peter from the timeline when he had the chance).
My guess is that they have a tenuous link to reality that allows some sensation through. The aforementioned relationships were preceded by long periods of observation. It's possible that spicy food is somewhat analogous -- it's the only thing they're able to taste.
Thanks to mbstang and IFightForTheLosers, it turn out that in episode 4 of season 1, The Arrival :
Walter offers some of the root-beer to the Observer, but the Observer declines. He comments that he could hardly taste it, anyway.
But he doesn't explain why he "could hardly taste it", so I think Plutor's answer is still superior.
I read on the Fringe Wikia that they have developed technology in order to control their own evolution. it says:
The technology begins to form new ridges in the brain to enhance rational thinking, referred to as "controlled evolution", consequently destroying emotion centers and with it a person's sense of humanity. This loss of feeling relates to both emotion as well as senses like taste."
It also says on Wikipedia's Mythology of Fringe page that
A distinguishing trait is their diminished sense of taste, and it is often shown that they can only taste very spicy food.
perhaps they only eat very spicy foods just so they know and can feel what they are eating, and perhaps to let their stomach know that they are full. I'm just taking a guess, but it seems that they only eat spicy foods because it's all they can taste, why they NEED to taste I'm not sure.
Capsaicin, the element in spicy food that creates the spicy sensation, forms a nerve barrier around what it touches. This is why it is a strong component of pain relieving cream or ointment. In effect what it does is create a shield that blocks the nerve from experiencing sensation without the presence of capsaicin. This effect is experienced on tastebuds as well, effectively making a person unable to taste food unless it is spicy. Perhaps this is the reason for his quote in season one. If the observers are always eating overly spicy food as is suggested by their non-linear time state, then their tastebuds would be completely blocked by capsaicin. As for why they eat it I'm not sure. Perhaps it has something to do with the lack of emotion, perhaps it isn't just emotion but all sensation and they need an overdose of something like capsaicin in order to experience things.
I suspect the real answer has a clue in the final season. When interrogated by the Observers, Nina Sharp notes how in their their quest to become more advanced, the Observers had reacquired some reptilian traits. Reptiles typically have few or no taste buds--the rub is that reactions to spicy foods (capsaicin, jalapenos) is not actually taste bud related but instead a reaction to cranial nerve irritation. One would suspect their taste buds were largely lost, and it order to maintain sensation while eating, this was their only option.
