It's hard to categorize The Watchmen. It's a graphic novel, to be sure, but it's got many layers to it. It's a period piece, set in the Cold War. It's an ethical treatise, pitting rival versions of morality against one another. It's an explication of human nature. It's a postmodernist deconstruction of the superhero genre. And it's many more things -- I suspect reading it again will reveal further levels.
Alan More and Dave Gibbons set their story in an alternative universe where superheroes are real, Nixon was elected for a third term,and the U.S.A. won the Vietnam War. The Superheroes, however, are not all that super. In fact, they're pretty pathetic characters whose powers are pretty much non-existent (with one notable exception). The plot centers around the death of several of these superheroes and a few of their rivals and twists into an incredibly detailed (and at times convoluted) story. There are also multiple subplots and numerous secondary characters as well as a comic within the comic and an intriguing text-based extracts from various primary sources set in this alternative timeline.
This isn't a book I enjoyed in they way I enjoyed some other graphic novels, and it's almost more akin to the comic equivalent of Franz Kafka. It's a disturbing and morally ambivalent universe that Moore and Gibbons create and the good guys aren't all that good and the villains are more pathetic than evil. Most of the heroes are pathetic vigilantes and their political philosophy is pretty much racist and fascist. Liberals aren't portrayed much better and come across as either hopelessly naive or as ruthless as their conservative counterparts. The illustrations do a great job of reflecting the atmosphere and Gibbons does a great job of recreating the style of earlier comics; there's a grimy and depressing quality to everything.
The Watchmen deserves its reputation and it deserves all the praise it's received. It won the Hugo Award and was named one of Time Magazine's top novels of all time a few years back. If you have a preconceived notion of comic books or superheroes, this book shatters everything you've thought about the genre. I don't think that everyone will appreciate this book -- there's just something odd and demented about it. I also found it a bit slow to get going but I think that's because I had trouble getting past my preconceived notions about superheroes. If you're patient with the book, though, and give yourself some time to reflect on the book once you've read it, you'll be more than rewarded.