After a long and tedious final battle with the Mad Hatter in About Face, Alice had gone up his clock tower only to be greeted by the watch and upon collecting it, the Cheshire Cat. Once Alice had collected it and left, she proceeded to the next area of Wonderland.
The watch only has a single use, which is the ability to stop time for a short period. During the period of its use, Alice is able to move around the domain while enemies and other animated objects will freeze. Afterwards, the Watch cannot be used again until the next level.
It can be noted that it can be only used for a period of time of around fifteen seconds, indicated by the slow-moving image concealing itself back into Alice's willpower meter.
The Watch's inability to be used again until the next level makes it more similar to her abilities (such as Rage Boxes and Grasshopper Tea) rather than her actual weapons. However, the Watch is more useful as it can be used at any time and not at a set period or level in the game.