It's basically a tool that allows you to get specific information from the web, and displays it to you in an easy format.
With version 1.5, you can now get versiontracker.com updates right into Watson. There are many other useful tools, too. You can get movie listings for a theater near you, complete with times, a summary and a preview of the movie, and if the theater supports it, you can even go buy tickets by clicking straight through Watson. You can do reverse zip code lookups with Watson, too. You can also check stock prices, get the value of a sum of money in another currency (with up-to-date exchange rates), search for images, get phone numbers, track packages, and check flight schedules. There are a couple of other tools that I left out, too.
What's even better is that as the developer makes more tools, there's an auto-update function that quickly downloads the new plugin and extends the functionality of Watson.
It's a great program, and I suggest you download it and try out. You'll find it will become indispensible (just like Watson, in "Without A Clue"

).