Psychic (occult) magic still provokes AoO, and observers can still use Spellcraft to discern what you are casting based off of the spell's aura.
It's not that psychic spells are treated as Still (or Silent), but rather that any spells cast by a psychic caster with a Somatic and/or Verbal component instead have those components replaced by Thought and/or Emotion.
It's important that psychic spells trigger AoOs, because spells with Thought components have a +10 to the DC of any concentration checks triggered during casting (such as by being attacked). Take away AoOs and the situations where that would be relevant become contrived, giving a clear advantage to psychic casters.