Swapwatch watches your swap - your virtual memory files on disk. They're located at the path /private/var/vm and take serialised names of the form swapfile0, swapfile1, and so forth.
An OS X system (as far as 10.6) starts you with the single swap file swapfile0 of 67,108,864 bytes (64 MB).
OS X users regularly complain of a 'sluggishness' and of seeing that dreaded spinning beach ball after long use without a reboot. It's the virtual memory system acting up. The more swap on disk, the more 'swapping' the system might have to do to switch applications.