I created an Observable using the Observable.fromCallable method and subscribed to it as shown in the code snippet below.
Observable<String> stringObservable = Observable.fromCallable(new Callable<String>() {
        @Override
        public String call() throws Exception {
            Thread.sleep(1000);
            return Thread.currentThread().getName();
        }
});
stringObservable.subscribeOn(Schedulers.io());
stringObservable.observeOn(AndroidSchedulers.mainThread())
        .subscribe(new Observer<String>() {
            @Override
            public void onSubscribe(Disposable d) {
            }
            @Override
            public void onNext(String aDouble) {
                Toast.makeText(SimpleActivity.this, "onNext: " + aDouble, 
                Toast.LENGTH_LONG).show();
            }
            @Override
            public void onError(Throwable e) {
                new AlertDialog.Builder(SimpleActivity.this)
                        .setTitle("Error")
                        .setMessage(e.toString())
                        .show();
            }
            @Override
            public void onComplete() {
            }
        });
The snippet above produced a toast showing that the Callable was run on the main thread instead of the Schedulers.io thread. What's happening?
Every operation on an Observable creates a new instance and does not effect the original one. Therefore
stringObservable.subscribeOn(Schedulers.io());
does not affect your code below.
The correct way of using them would be in a chain instead of using a variable.
Observable.fromCallable(new Callable<String>() {
    @Override
    public String call() throws Exception {
        Thread.sleep(1000);
        return Thread.currentThread().getName();
    }
}).subscribeOn(Schedulers.io())
    .observeOn(AndroidSchedulers.mainThread())
    .subscribe(new Observer<String>() {
        @Override
        public void onSubscribe(Disposable d) {
        }
        @Override
        public void onNext(String aDouble) {
            Toast.makeText(SimpleActivity.this, "onNext: " + aDouble, 
            Toast.LENGTH_LONG).show();
        }
        @Override
        public void onError(Throwable e) {
            new AlertDialog.Builder(SimpleActivity.this)
                    .setTitle("Error")
                    .setMessage(e.toString())
                    .show();
        }
        @Override
        public void onComplete() {
        }
    });
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