In the Fellowship of the Ring, our heroes encounter a creature called "The Watcher in the water" which was guarding the Doors of Durin, the ancient and abandoned entrance to the Mines of Moria. What was it? It isn't revealed in the trilogy. Is it explained in any of Tolkien's notes?
It appears to be some kind of vaguely defined underground lake Kraken or similar dungeon lurker.
From Watcher in the Water on Wikipedia:
Since Tolkien never explicitly stated what the creature is, others have felt free to speculate on its identity and origins. In A Tolkien Bestiary, David Day calls the Watcher a kraken; however, he also implies that there are some differences between the kraken of Scandinavian folklore and the Watcher in the Water. However, Tolkien never called the Watcher a kraken nor described the presence of krakens in Middle-earth. In The Complete Tolkien Companion, J. E. A. Tyler postulates the Watcher was a cold-drake: "...these dragons rely on their strength and speed alone (the creature that attacked the Ring-bearer near the Lake of Moria may have been one of these)." Another writer compared it to squids.
The accepted answer is excellent, but I'd like to add that we just don't know.
Within the works it's not even 100% clear that the Watcher is one creature or a number of independent snake like creatures working together.
‘I felt that something horrible was near from the moment that my foot first touched the water,’ said Frodo. ‘What was the thing, or were there many of them?’ ‘I do not know,’ answered Gandalf; ‘but the arms were all guided by one purpose. Something has crept, or has been driven out of dark waters under the mountains. There are older and fouler things than Orcs in the deep places of the world.’ He did not speak aloud his thought that whatever it was that dwelt in the lake, it had seized on Frodo first among all the Company.
While it's extremely likely that it was one creature, and the Kraken theory does fit, we cannot say for certain without a degree of speculation.
In addition to the suggestions in other posts, when Gandalf was recounting his fight with the Balrog to Aragorn, Legolas and Gimli, he says
[...] till at last he fled into dark tunnels. They were not made by Durin's folk [...]. Far, far below the deepest delvings of the Dwarves, the world is gnawed by nameless things. Even Sauron knows them not. They are older than he.
So it is possible that one of these "nameless things" found its way up to the lake.