Mysterious Doctor Who Characters: Who, or What, Is The Watcher?

The Watcher watching the Fourth Doctor, Adric & Nyssa.

     Doctor Who, in it's 50 year history, has certainly had its share of strange & mysterious characters. One of those characters has always stood out in my mind, if only for its seeming lack of explanation: The Watcher, who first appeared during the events leading up to the Fourth Doctor's regeneration, also known as the serial Logopolis.
     Sporting a featureless face & white, almost mummy-like clothing, The Watcher is first seen observing events that led to companion Tegan Jovanka first entering the TARDIS. He seemed to have the ability to travel thru time & space on his own accord, although he did pilot the TARDIS twice: once to transports Nyssa away from the impending destruction of her home planet Traken & again, apparently at the Fourth Doctor's request, taking Adric, Nyssa & Tegan to safety away from Logopolis. It was during the latter trip that The Watcher had a private conversation with Adric even though he was never seen to speak on-screen. The novelization of Logopolis suggests The Watcher communicated by telepathy & indicates that when Adric tried to remember the sound of the Watcher's voice, he could only think of the Doctor speaking. In the Logopolis serial, the Watcher also had a conversation with the Fourth Doctor the details of which were never revealed, but it is thought the Doctor was made aware of his forthcoming regeneration as indicated by his final line "It's the end...but the moment has been prepared for", after which the Watcher merges with the dying Fourth Doctor & they regenerate into the next incarnation. In Castrovalva, the first serial to feature the newly-regenerated Fifth Doctor, Adric shows unexpected knowledge of regeneration, possibly revealing the nature of his conversation with the Watcher.
     In the audio-drama "Winter", a 2007 Big Finish audio-drama which takes place mostly in the Fifth Doctor's mind in the final moments before his regeneration in the serial The Caves of Androzani, the Doctor once again encounters the Watcher in his mindscape.
     One of the most interesting pieces of information regarding the Watcher comes from The Time Traveller's Companion, a supplement for the Doctor Who - Adventures in Time & Space role-playing game, where it is implied that the Valeyard is a rogue Watcher created during the Twelfth Doctor regeneration into the Thirteenth. This Watcher, who is presumed to possess the darkest aspects of every Doctor's nature, apparently refused to merge with the Time Lord & escaped.
     So who was the Watcher, exactly? Is it a physical manifestation of the regeneration process? Do all Time Lord have their own Watcher? In Divided Loyalties, a novel in the Past Doctor Adventures series, the Watcher of the Doctor's friend Rallon merges with The Celestial Toymaker (who had possessed Rallon's body) after Rallon's death to keep the Toymaker in check, causing the Toymaker's personality to change as though he had regenerated. This does seem to propose that the Watcher is not unique to the Doctor, although the crossover continuity of TV & novel (and audio-drama) canon has always been debated amongst Whovians.
     Who, or what, do you think the Watcher is & what relation does he/she hold to the regeneration process?