Lookout is a noun. It mainly refers to (1) one who keeps watch, (2) the act of keeping watch, and (3) a high place used to observe a wide area. To be on the lookout is to be on guard or to watch for something. The word occasionally functions as an adjective as well, as in phrases such as lookout tower.
When you need a verb meaning to watch, to watch over, to keep watch, or to take care, make it two words: look out. For example, when it is your turn to be the lookout, you might ascend the lookout tower and look out over the surroundings.
Look out is a verb—hence two words—in exclamations such as Look out! A spider!
A third form, the hyphenated look-out, is sometimes used in place of lookout, but the unhyphenated form is well established throughout the English-speaking world.
Movie studios are always on the lookout for a sure thing, and this fall they’ve found a few of them. [Newsday]
This used to upset my mother, who would exhort me to look out the window at “the beautiful view.” [Globe and Mail]
From here I could see the Green Line – the border between the north and south – with its lookout, guards and competing flags. [Telegraph]
Look out for the ducks. [New Zealand Herald]
Outside the boundary of Cotehele’s flowery herbaceous borders … this three-sided folly may have been a lookout tower. [Guardian]