The Watchfire has many useful characteristics. At 4% defense bonus two of them have the same impact as a Ritual Flame, but with the added placement flexibility of each only taking up a single tile. With one or both Watchfires upgraded, they are 25-50% better than their GE counterpart. On a per-tile basis, Watchfires (and Ritual Flames) have an outsized impact over other defensive buildings such as the Monastery, the Athlete Living Quarters, or even the defensive Great Buildings, the Cathedral of St. Basil, Deal Castle, and the Terracotta Army.
However, Watchfires originally could not be upgraded and now cap at a 6% bonus - unlike Great Buildings which can, theoretically, be leveled significantly higher. Watchfires also only impact your city army's defensive stats, not their attack stats, effectively hardening your defenses. It's still quite possible for a sufficiently buffed attacking army to wear down your city's defense if your army isn't hitting them back hard enough during the battle. Finally, Watchfires only provide a defense bonus - no coins, no goods, no other production modifiers.
All that said, Watchfires are an effective way of increasing your city's defense, and extremely cheap - if not the cheapest - in terms of space cost.