At $3, Watchtower is the most expensive Reaction thus far, but well worth the price. It is one of the most versatile cards in the game, and the only Action thus far that provides a benefit even without playing it.
First, and most obviously, Watchtower is a devastating defense card against Curse-givers. Not only does it block the Curse from entering your deck, it actually trashes the Curse, meaning that an attack-heavy opponent will soon find himself running out of Curses to give. (Compare to Moat, which, against a Witch-heavy player, only delays the inevitable.) Although it provides no defense against “deck-inspection” attacks (e.g. Spy, Thief, Pirate Ship, Rabble), it does subtly defend against handsize-reduction attacks by allowing you to draw back up to 6.
Second, if you’re willing to hold onto Watchtower and not play it, it works as a mini-Royal Seal, minus the $2. There are some ridiculous ways to take advantage of this; most powerful is probably playing a Talisman, buying a Treasure Map, gaining another one, and putting them both on the deck! More commonly, you can buy something like Village/Smithy or Throne Room/[some other action] and ensure that you draw them together next turn. Even when you just have one buy, Watchtower can make sure you play important attack cards before your opponent gets a chance to.
Third, and this is a very specialized use, Watchtower greatly increases the power of Goons. Ordinarily, Goons-heavy players will avoid buying too many Coppers for VP tokens for fear of weighing down their deck. Watchtower solves this problem by trashing the Coppers as they come in, while still collecting the VP tokens.
Finally, Watchtower can form part of a good card-drawing engine. Although Library is superior (both because it draws more cards, and also because it can discard unwanted Actions), Watchtower is much cheaper and fulfills other roles as well. In addition, drawing a dead Watchtower (either because you have no Actions left, or because your hand size is very large already) is much less of a liability than a dead Library because of its other uses, as noted above. It is especially useful with Vault.
- Festival, University, and other +Actions that do not replenish your hand
- Talisman, or other sources of multiple Buys
- Curse-giving attacks (Witch, Mountebank, Torturer)
- Handsize-reducing attacks (Militia, Goons, Torturer, Ghost Ship)
- Cards that increase hand size (e.g., Laboratory/Alchemist, Caravan/Wharf, Tactician)
- Attacks that it does not defend against (Pirate Ship being the most important)
- Royal Seal, since the benefit becomes a bit redundant
- Library, since Watchtower is an inferior engine card