Ebay feeds them the info. I also use this site, find it helpful sometimes to predict if an all out bidding war will break out. I have had 60 competitors watching same item and no one try to outbid me. Sometimes results are puzzling.

"Admittedly, sometimes there are minor inaccuracies to the Watch Counts of multi-variation fixed-price items displayed in our search results (because of the way eBay internally tracks watchers – across multiple item variations). This is due to technical limitations in the data-feed that eBay allocates to us and is out of our control (sorry)"