I may very well be wrong, but i think laufen implies only the action of walking, while spazieren implies that the person is making it a planned activity/trip of it, if that makes any sense.
I'd say that spazieren gehen is "going for a walk" where the main point is the walking (in the fresh air, or to enjoy the scenery), rather than getting to a particular place.
How are we supposed to know which is which when "Sie" starts the sentence, and the verb conjugation is the same? Imo, both "She is..." and "They are..." should be acceoted in this instance simply because there is no context, and both are correct from a grammatical sense. Please let me know if I'm mistaken, as I'm still learning.
"she is going" = "sie geht"
What I think you meant is the formal you form: "Sie" with a capital "S". So this sentence could be either meant as "They are going for a walk." or "You are going for a walk (, sir/ma'am/s)." The feminine singular version uses a different form of verb though.
I hope I could be of help.
I believe if this were to translate to "She goes for a walk," the German would read as: "Sie geht spazieren."
This is a situation where you get your answer from the verb. Here it is gehen meaning they go.
It could not be "she is" because that would require "geht" instead of "gehen". It could, however, be "you are" going, using the formal "you".
What is wrong with "they are going walking". It means EXACTLY the same in English. "I am going for a run" or 'I am going running" nothing different about both statements. So can someone please tell me why am I marked wrong?
I disagree with, " they are going for a walk" as walk in this context is a noun not a verb as it is in the German sentence.
You can't always translate English to German 1:1; sometimes, the two languages have different ways of expression things.
For example, "He has a cold" (with noun "cold") versus Er ist erkältet (with adjective erkältet), or "He is hungry" (with adjective "hungry") versus Er hat Hunger (with noun Hunger), or "He likes to swim" (with verb "likes") versus Er schwimmt gerne (with adverb gerne), or ....
Don't look at individual words but more at phrases or expressions -- such as "go for a walk" which, as a whole, can be translated by spazieren gehen.
I think this is a related issue with the same thing that everyone is pointing out, "they go walking" or "they are going walking" is an equal translation. If there is an equivalency using the same part of speech, should it not be done?