A principle of interpolating sliding mode observer is introduced in this paper. The observer incorporates multiple linear observers through interpolation of multiple estimates, which is treated as a type of adaptation. The principle is then applied to the ball and beam system for observation of the slope of the beam from the measurement of the ball position. The linearised model of the ball and beam system using multiple linearisation points is developed. The observer dynamics implemented in Matlab/Simulink Real Time Workshop environment. Experiments conducted on the ball and beam experimental setup demonstrate excellent performance of the designed novel interpolating (adaptive) observer.