It gives a stacking 4% boost to your army's defense rating, when you are attacked.
The watchfire has many useful characteristics. It is great in the higher levels for players who want to get more points. In the higher stages, PvP is the best way to get points. To prevent getting defeated, a lot of people have many watchfires. Because of the possibilities of getting a watchfire, some players have over 80 watchfires, which combined with their great buildings make them practically invincible. Two defensive great buildings (Cathedral of St. Basil and Deal Castle), at level 10, have a total of 60% defensive boost. Having 50 watchfires and two fully leveled defensive great buildings give 260% defensive boost, making the attacker no match for the defender. Watchfires were available cheaply and easily in the 2013 and 2014 Easter Event, but have since become somewhat harder to obtain. Overall, watchfires are extremely good.