The watchdog timer is a simple mechanism that can be used to avoid software lockups )think of an infinite loop). The term "watchdog" is common in the software world. When a process stops responding for some amount of time, an external mechanism, the watchdog, will reset the locked up process. This is exactly what happens in the PIC. When you decide to use the watchdog timer, you have to tell it several times a second that "hey, I'm ok". If the watchdog doesn't hear from you for too long a period of time, it's gonna assume you're lost in a loop and just reset the PIC.