The user watches are used by inotify to monitor file system events. The default limit is relatively small because each watch takes up kernel memory (~200 bytes). On a multiuser system this can potentially add up.
Here's how to configure it temporarily:
# Show current value (i.e. 8192)
sysctl fs.inotify.max_user_watches
# Increase limit to 131072
sudo sysctl fs.inotify.max_user_watches=131072
To make the change permanent, edit /etc/sysctl.d/99-sysctl.conf
and append:
fs.inotify.max_user_watches=131072
Straight out of the Archlinux Wiki.