Although Artificial Intelligence (AI) systems are playing an increasing role in critical domains such as healthcare, finance, and autonomous systems, their decision-making processes remain largely opaque. This paper examines the challenges of AI transparency, addressing the “black box” problem using Explainable AI (XAI) techniques such as SHapley Additive exPlanations (SHAP) and Local Interpretable Model-agnostic Explanations (LIME). It also examines the ethical, regulatory, and societal implications of AI opacity and proposes a Comprehensive AI Observability (CAO) Framework that integrates deep explainability, provenance tracking, and real-time monitoring to enhance AI accountability. By bridging technical solutions with governance structures, this research emphasizes the necessity for adaptive, transparent AI-based solutions that align with ethical norms and expectations. The findings underscore the importance of interdisciplinary collaboration in making AI decisions interpretable, ensuring trust, fairness, and responsible deployment in practical applications.