A shrewd and gruff proprietor of a junk shop in Mos Espa, Watto is a crabby, unshaven Toydarian with a love of credits and gambling. Although considered one of the smaller shops of Mos Espa, Watto's junkyard was nonetheless a treasure trove of discarded machinery and spare parts.
Among Watto's possessions were the slaves Anakin and Shmi Skywalker. Having won them from Gardulla the Hutt in a Podracing bet, Watto put them both to work in his shop. Young Anakin showed an incredible talent for machinery repair, and Watto took a shine to the boy. Even though he was unscrupulous enough to keep a slave, Watto was a fair master. It most probably had to do with the fact that the boy was a prime source of income for Watto, not only in keeping his machinery running, but also actually competing for Watto in the Podraces.
Anakin was an incredible pilot, the only human known to compete in the dangerous high-speed sport of Podracing. But in races where Anakin would compete against the shifty Dug Sebulba, Watto would always bet on the latter because, as Watto says, "he always wins!"
Watto's greed and gambling got the better of him one day when a mysterious outlander came to his shop to barter a deal for starship parts. The Toydarian ended up not only betting all his money away, but also Anakin's freedom. Sebulba failed to finish the Boonta Eve Classic, and Anakin came in first. Watto lost everything.
Desperate to recoup some of his losses, Watto eventually sold Shmi Skywalker to a moisture farmer named Cliegg Lars. The down-on-his-luck trader reported as much to a grown Anakin Skywalker. The young Jedi had returned to Tatooine a decade after his departure in search of his mother.
Watto is a stout, blue-skinned Toydarian, with rapidly flapping wings that keep him hovering at about a meter off the ground. The craggy-toothed merchant not only has a knack for haggling, but also cannot be affected by Jedi mind tricks.