The Watchmaker was a powerful Time Lord in her time. She was married to one of Rassilon's generals. As the Time Lords were about to win their war against the Vondrax, their enemies created a paradox, and her husband was removed from the timelines completely. The Watchmaker was the only one who could remember him and swore to bring him back. She changed time several times while attempting to bring him back, so much that she became less of a Time Lord and more a wraith-like creature.
The Watchmaker helped Romana II and Leela to influence the timelines and create a future for Gallifrey that avoided the disasters they had witnessed. She then appeared to Irving Braxiatel and offered to help sort out the paradox that was his timeline. (AUDIO: Enemy Lines)