The Time Magic Pocketwatch was an artifact previously in the possession of a somewhat dubious, Society of Magicians based in England; until it was stolen by one of it's members, Yuna D. Kaito.
Yuna was supposed to be guarding it when it "went missing" under his watch. He was subsequently banished from the society.
Eriol later reveals that the society had learned of Yuna "misplacing" the pocket-watch as a means of stealing it.
Time Control & Manipulation: With the help of this pocket watch and a spell, after having made a pact with the powers of the watch, Yuna is able to use it to turn back short stretches of time, affecting anyone within the area that he wishes to turn time back upon. The individuals affected will forget anything Yuna have said or done within those few minutes, allowing Yuna to rewrite the present as he sees fit; according to Momo, however, while most are effected, Sakura Kinomoto, because of her own growing powers, will soon-or-later become immune to the watch's chronokinetic powers, the more Yuna uses it.