Is the time taken by the observer in motion given by the equation
$$t'=t / \sqrt{1-(v/c)^2}$$
Yes. The important point to appreciate is that the Lorentz factor is derived very simply from Pythagoras's theorem. Take a look at the simple inference of time dilation due to relative velocity on Wikipedia:
Public domain image by Mdd4696, see Wikipedia
The hypotenuse of a right-angled triangle represents the light path where c=1 in natural units. The base represents your speed as a fraction of c. The height gives the Lorentz factor, and it's $\sqrt{1 - v²}$. You can write v²/c² because c=1, or you can write that as (v/c)², and we use a reciprocal to distinguish time dilation from length contraction.
Does this signify that as time is travelling slower for the observer in motion?
Kind of. But note that time isn't "travelling", and motion is relative. If you and I are two observers passing one another in space, we could each claim that the other guy is in motion, and that his clock is the one ticking slower. To appreciate what's going on here imagine we each have a parallel-mirror light clock. You see your clock light going like this ||, and my clock light going like this /\, and I do too. This is the "twins paradox" but it's nothing special. When we're separate by distance I look smaller than you and you look smaller than me. But we know about persepctive, so we don't shout woo, paradox! Nor should we when we're separated by relative motion and my time looks slower than yours and your time looks slower than mine. It's just another type of perspective.
it takes more time than the observer at rest to measure the time interval of 5 sec?
Yes. But note that you can only deem one of the observers to be at rest if the other one does and out-and-back trip.