Translation:My nephew was watching the animals in the zoo.
How can it be easy? In a conversation with minimal context one would always be wondering. For example: what did you do yesterday? “I watched a movie with my Nipote.” I am both an uncle and a grandfather. Without further explanation… Not context...with whom I watched the movie is in doubt.
That use of 'would' is not conditional, it is passive.
As for 'used to...' I also am trying to learn the difference and the best I ca explain is that here 'used to' is not correct because there is nothing in the sentence to suggest that my nephew no longer watches the animals. I'd love to hear more comments on that.
I'm confused about something I've seen in a few exercises now: shouldn't 'lui guardava' be 'he watched' and 'lui stava guardando' be 'he was watching'? In quite a few exercises Duo seems to be mixing gerund with past imperfect and I don't really understand why, anyone that can explain?
Probably best to read the tips on this point for the Duo explanation. But "he watched" can mean that he used to watch or would watch over a period in the past with an indeterminate beginning and end. In this case the Italian would use the imperfetto. Because English has no imperfect tense, we can use the same words as the simple past and let the context sort it out (e.g. we watched it every week) , or use expressions such as "would watch" or "used to watch". The gerund form is referring only to "was watching" at the specified time.
"The animals" would be more common. Because there are specific animals in a zoo. They are zoo animals and not just animals that happened to wonder into the zoo that day.
If you were looking at animals in a park, then you'd leave out the word "the," because those are just random animals that happen to be in the park.