Marking (that / it)
Solution 1:
Mark it is a common instruction in dance and theatre rehearsals. It means 'Do it but, for the moment, don't worry too much about the detail.'
It is useful when 'blocking' a scene: working out the main movements in it. The director tells the actors 'Just mark it.' He doesn't need to hear all their lines while he blocks the scene. And he certainly doesn't want any acting going on. He just wants to look at the overall movement on the stage; to decide, for example, who goes where when so-and-so enters. After learning where and when to move, and walking it through a few times, the actors start rehearsing WITH the lines and the acting.
In the extract, the actor is suddenly aware that Mr Smith is watching. He realizes he's just been marking it and feels he should put a bit more passion into whatever he's doing.
In real life we might say, 'I was just going through the motions'.