Which term has to do with how we categorize people based on personality characteristics we observe?

The correct answer is the term associated with how we categorize people based on observable personality characteristics: Implicit Personality Theories. This concept refers to the mental frameworks that individuals use to make assumptions about others' personalities based on limited information or observations. For example, if someone sees a person being friendly and outgoing, they may assume that person is also sociable and empathetic, applying their own experiences and beliefs to form these impressions.

Implicit Personality Theories influence how we interpret behaviors and make judgments about others. The theories are crucial in social psychology because they help explain why certain characteristics are attributed to individuals based on their observable traits and interactions. This is distinct from other terms provided, which may involve different aspects of social interaction or perception without specifically focusing on the categorization of people based on their personality traits.