"Neighbourhood Watch" is notable because it departs from Egan's usual high-tech science fiction. Egan has written several horror short stories, including Scatter My Ashes and Mind Vampires, but no horror novels. These short stories are available to read online at Egan's website.
Neighbourhood Watch is essentially a perverse fantasy twist to the legitimate neighborhood watch concept. The plot revolves around the attempt of a small town to fight crime by signing a contract with a demon.
The town council's contract states that the demon may only consume those who have broken the law after eleven o'clock at night. The demon is created by the collective nightmares of the townspeople and their children.
The demon takes the physical form of an ordinary man. However, he possesses demonic strength and is enormously hot. The heat is a physical manifestation of the demon's hunger for living flesh. To somewhat reduce that hunger, the demon is kept chained between slabs of dry ice underground in a fallout shelter. The council also feeds him raw meat which he manipulates telekinetically.
The demon is allowed to consume those who break the law after dark. The demon's real wish, however, is to consume the town's young children. Especially a young boy called David.