The new L7 observability features in Consul Connect, introduced in Consul 1.5, provide deeper insight into the behavior and performance of services by enabling monitoring of protocol-specific error rates and response codes. This allows for better correlation of events and identification of failures in production. By configuring metrics collection through a centralized configuration file, users can collect L7 metrics from Envoy proxies in a consistent way, regardless of programming language or framework. The features also support distributed tracing and integration with tools like Grafana to provide a comprehensive view of system performance.