Your watchlist is a mechanism for keeping track of edits to a particular set of pages on Shifti, making it easier to spot people making changes or adding comments to your stories. Each Shifti user has their own personal watchlist, accessible via the "my watchlist" link in the upper right corner of the default skin.
To add a page to your watchlist, visit the page (when logged in to your user account) and click on the "watch" tab that appears at the top of the default skin. You'll be informed that the page has been added and the next time you visit the page the tab will have changed to "unwatch", which can be clicked to remove the page from your watchlist.
The talk pages of pages on your watchlist are also automatically added to it, even if they don't exist yet. Your own user page is also automatically on your watchlist by default.
Most commonly, an author will want to watch all of his story pages. To make sure that one doesn't forget to add all of one's stories, there is an option under your preferences' watchlist section called "Add pages I create to my watchlist". Enable this option and every page you create afterward will automatically be added to your watchlist.