Watchers are a demonic beings as old as the earth itself. They are masters at the art of deception. According to a Jewish legend, they were put on Earth to watch over humankind, hence their name. In Dragons in Our Midst, they took on semi-physical bodies in order to marry humans, such as Morgan. These unions produced the original Nephilim.
The Watchers can be destroyed by dragon fire, though they are powerful enough to survive a battle with any but a skilled fighter. They can send jets of a black, tar-like substance from their eyes. It spreads out and coats anyone it touches, eventually suffocating them, and floods them with despair. It can be burned off, but this is time-consuming during a battle. It was because of the dragon's capabilities in resisting them that they tried to wipe out the draconic race before taking Earth.
The Watchers appear angelic and shimmering. It was partially because of their beauty that Shelly trusted them, allowing her to be decieved by Morgan. They are able to disguise themselves at will. In Shelly's case one temporarily appeared as a young man and offered her a ride.