A watchdog timer is one that if allowed to timeout will usually perform a system reset(much like the initial power up). In order to prevent this happening, your software is responsible for periodcally resetting the watchdog, thus preventing it from ever timing out. If your software fails to do this (i.e gets stuck in an infinite loop), then the watchdog timer will timeout and (typically) cause the program to restart. It's a safeguard against the system locking up completely.

A timer operates on much the same principal, only upon timeout an interrupt will occur. Obviously, you could elect to cause a system reset in your interrupt routine, thereby making an 'ordinary' timer into a watchdog timer.

Hope this helps.

David