Clock

Watches were added in the Halloween Update on October 31st, 2010. They are created by using one Redstone and four Gold Ingots (see formation below).

The watch works like the compass, in the sense that you cannot use it, but its image changes depending on the circumstance. The watch displays where the sun or moon's position is in relation to the horizon. However, the watch does not work in The Nether, the watch dial will spin rapidly both forwards and backwards.

The watch crafting recipe is as follows:



Telling the time
Below is a gif explaining how the watch works. The watch consists of two halves with a day side and a night side. These spin slowly to tell you the time of day, corresponding to what is at the top most point.

Alternatives
If you do not own a watch (or if you don't have the materials for a watch), your next best solution is simply looking at the Sun or Moon's position in the sky. However, the watch has it's greater advantage, of being able to use it underground or areas you cannot see the sky. Another, less helpful method is by listening 5-10 blocks below the surface. If there are many zombie / skeleton sounds, you can assume it's night. On the other hand, if you hear lots of zombie / skeleton taking damage sounds, you can assume it's dawn and they're on fire.

Perhaps the easiest way to know if it is night or day while underground is to toggle the view distance (F key). This removes all blocks for just long enough to see if the sun or moon is out.

Another easy alternative to telling time is simply mining a fair length tunnel out, about 2 blocks high and 1 block wide, and looking down it from a distance with tiny view distance selected. You should notice how the lighting in the hallway will become a light whitish color in the daytime, to a dark and bluish hue in the nighttime. This is a good technique when you are deep underground, or at any level in the earth, to use without a watch.