I loved this episode. What I weaned from it, is that this *IS* our Peter's timeline and he doesn't believe it, and in the previews for the one in four weeks, the Olivia of this timeline is losing her 'old' memories, or perhaps she's losing her 'peter' memories, couldn't quite figure that out. I think what the observer truly meant, is that Peter's Olivia wasn't the one that had his baby, and in theory, no longer exists.
Love the angst aspect that'll be on the show now though. Interested to see how all the characters are going to deal with it. And how irritated Lincoln will be if all this Olivia talks about it missing Peter. lmao.