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.