I thought about something I havent done in a long time,
Remember the Fellowship of the Ring? Where the Fellowship is about to enter Moria, but then gets disturbed by the Watcher in the Water?
Some of you may think that the Watcher in the Water was just waiting for prey for hundreds of years to eat, - and I do not deny this possibility. But what made this attack so mysterious, is that it out of all of them, it attacked Frodo. Who at that point would wield the Ring.
And here is where it gets interesting, Gandalf mentioned in the books that there are older and fouler things beneath the world than Orcs, and even Sauron. The Watcher is a beast older than Sauron himself. But, that would be quite insane dont you think? Gandalf may spoke about Sauron's age after he became Evil. Reducing the amounts of years, but still making it thousands of years old.
Why did it first attack Frodo out of all of them? Maybe he looked for a simple prey? But why Frodo out of the exact 4 Hobbits? The Watcher was no mere oversized squid this proves. The Watcher sensed the Will of the Ring, making it related to the world of Shadows, and proving that it has a Spirit in that world. And those who are in contact with the spirit world are of no good most of the time.
Conclusions:
Its an oversized squid, who happened to live there and attack Frodo first out of coinsidence (chance: 1%)
During the First Age, when Morgoth bred foul things in places such as the misty mountains, The Watcher was one of his creations. A powerful servant of the first Dark lord that was a 'failed experiment'. Due to this he was not used for any war purposes, but simply let him to his faith somewhere in the mountain ranges of the misty mountains. (chance: 50%)
The Watcher is an ancient Maiar, who himself indeed was bend to serve Morgoth, but the plans changed later on. Cursing the beast to roam these lakes forever. The tremendous willpower that it needed to enter the Shadow world would make him very capable of using the Ring for his own purposes, and not suffer any consequences. He would not serve Sauron. But take on a new form (perhaps the form before he was cursed into being a giant squid) and claim to be a new dark lord in Middle Earth. There are rumors about him being a former Elf, after betrayal, cursed to live in this form until the end of times. (chance: 49%)