The Watcher in the Water is a mysterious creature who lived in Sirannon, the lake next to the West-gate of Moria.

The Watcher certainly seemed to be a force of evil, but it probably wasn't under the control of Sauron.

It in uncertain even whether the Watcher was one creature or many, but whichever was the case, many coiled arms were used to attack Frodo when the Fellowship passed into Moria.
Encyclopedia entry originally written by IsildursHeir