The Demon-Possessed Watch is a magical watch which supposedly contains the essence of a demon within it.   The Watch is most notable for giving one the ability to create Shivvel at an accelerated pace.

Originally in the hands of the Balacazars, the fire on Salachor Isle (their offshore drug processing facility) lead to the Watch being put on a ship with the corpse of Linelle Cran.  When that ship went down in flames, the Watch was temporarily lost.

(See the adventure "Smuggler's Daughter" for another summary of these events)

You discovered the Watch had animated the dead girl, who roamed the city for a time, eventually ending up a "guest" in the dungeon of the Dark Reliquary (though not in a cell, her quarters were locked from the outside).

On a mission to trade the Watch for the Hand of Danar, you invaded the Dark Reliquary, found and eliminated undead Linelle, and took the Watch to the Vladaams.

In the Vladaam's possession, the Watch is again being used to advance Shivvel processing.  You have also learned that the dark elf Shilukar is working with Vladaams to use the Watch.