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 have a watch, you can approximate the time my looking at the position of the Sun or Moon in the sky. When underground, or in an area without a view of the sky, you can use the sounds of nearby enemies as a cue to the current time; if you hear zombie/skeleton sounds you can assume it's night, and if you hear the sounds of enemies taking damage, you can assume it's dawn and they're on fire.

Furthermore, one quick trick to tell the current time while underground is to toggle the view distance (F key). Doing this redraw all blocks around you, which may give you just enough time to see if the the sun or moon is out.

You may also try mining a long tunnel, of 2 blocks high and 1 block wide, and looking down it from a distance with the shortest view distance selected (Press F). You should notice how the lighting in the hallway will become a lighter whitish color during the daytime, and will be a darker blue hue during the night. This technique will work at any level in the earth.