The only way the pattern lock is secure is if you check the box to not show the pattern. Other wise its super easy to see someone's pattern
The problem isn't someone watching your screen as you unlock it. Even my 8-character-must-include-a-lowercase-an-uppercase-and-a-number password corporate insanity is 100% vulnerable the instant someone watches me unlock it.
The problem with the swipe pattern is that you are drawing a line in finger schmutz on your screen every time you unlock your phone. Then, as you tap merrily away at your screen, you are slowly and randomly obscuring parts of that line in additional layers of finger schmutz. Hold your phone at an angle to the light and you may be able to make out the line that you drew while you were drawing the pattern.
Of course, something as simple as wiping the screen against your pants when you turn the screen off will obscure it, but Murphy ensures that the one time you leave your locked phone at the bar under the care of a friend for a quick trip to drain a kidney is the one time the friend will look away at the wrong moment and someone will casually slip it off the bar on their way out.
Pattern lock is still relatively secure - the number of times it is readable is relatively low, it's more convenient to some people than a PIN and is therefore more likely to be used (and any lock is better than no lock), etc. But it's about the weakest of security measures.