Learn Spanish (Latin America): Él no es chismoso; mejor dicho, es observador. - He is not gossipy; or rather, he is observant.

Mejor dicho literally translates to 'better said' and is used to correct or refine something you just said. It acts like 'or rather' in English. You could use más bien here to mean 'rather' or 'instead,' but mejor dicho specifically signals a self-correction, as if you realized chismoso was too harsh of a word and quickly fixed it.

Does chismoso come from the noun for gossip?

Exactly. It comes from the noun chisme, which means a rumor or a piece of gossip. By adding the common adjective suffix -oso (similar to '-ous' or '-y' in English), it becomes a word describing someone who loves to gossip.

Why is it es observador and not es un observador?

When using the verb ser to state someone's profession, nationality, or defining personal traits, Spanish generally drops the indefinite article (un or una). You treat the word more like an adjective. You would only add un if you attached another descriptive word to it, such as es un observador muy atento (he is a very attentive observer).

Is the punctuation around mejor dicho mandatory?