Yes, you are right. Both objects know each other if that is what your are referring to. The important thing is what they know about each other. While the BinaryObserver knows the Subject in detail the Subject knows only Observers. To be more precise the Subject doesn't know the details about your BinaryObserver it can only send messages to it that are defined in the Observer class. In that way Subject is decoupled from the details of your BinaryObserverclass.
To sum up, while the coupling in of the BinaryObserver to the Subject is very high the coupling in the opposite direction is weak.