Kimihiro Watanuki (better known as just "Watanuki") is a supporting character in Tsubasa:Reservoir Chronicles and a crossover character from it's sister-CLAMP's series xxxHOLiC. He is the main character in that series, along with Yuuko Ichihara , also known as the Dimensional Witch.
In xxxHOLiC, Watanuki is a teenage boy who has a sloppy relationship with his friend, Domeki and lives on his own (it is later mentioned in the series that his parents had died, the same that was corrected in the latest chapters), who also has a particularity, he can see spirits. One day, he is drawn to Yuko's shop, and makes a wish to stop seeing them. As a price, he must work for Yuko until his work can balance out his wish.
In Tsubasa Reservoir Chronicle, Watanuki meets the party at times, and is implied to have a "very strong bond" with "Syaoran", as Yuuko states that he's the person "closer to Syaoran than anyone else." His true identity remained a mystery throughout the series. It's not up until the Clow Future's Arc that "Syaoran" finally explains this bond.
At the begining of both series, he appeared to hand out the Mokonas to Yuuko. He shows interest in Syaoran and Sakura, and hopes that everything will work out for them.
As the stories progress, Watanuki continues to be haunted by his uncertain past and seeks to find answers (since he's unable to remember many things of his past, including memories of his parents, even not able to remember the taste of food). He becomes more and more drawn into the Dream World, where he meets Domeki's grandfather (Haruka), Yuuko, and even Sakura in the Nihon/Dream World arc. When he finally meets Sakura and is able to speak to her, he realizes he can't remember his parents' names.
Yuuko explains to the party that he was in fact, unable to remember those memories of his parents because he had paid for the wish of locating the Sakuras. He paid his memories, even erasing the memory of having handed them. This implies that Watanuki had already met Yuuko before he was first seen in Yuuko's shop (Chapter 01, xxxHOLiC). These memories are contained by Larg's earring- which contains both memories from Watanuki and Clone Sakura.
When he had fallen off a window (xxxHOLiC) it was hinted that it was because of Himawari's bad effect on people. This was later corrected by Yuko, who mentions that when "Syaoran" battled the Clone in Tokyo, he sensed it. "Syaoran", too, is said to have paid for saving Watanuki's life.
He is revealed to be "Syaoran's" alternate existence. He was born when Syaoran made his wish of rewinding time, in order to fill his void left to his parents.  Thus he became Syaoran and Sakura's son, but they made a wish for him to be different to "Syaoran Li" otherwise he would cease to exist. (This is also explained in xxxHOLiC) Fei Wong told him at the time of his creation, that his existence would cause pain to his parents, since he's a being not originally meant to exist.
He's also told him that his existence was a distortion which would "bring misery to those around him", as Yuko covers his ears and "Syaoran" pleads to him, "Don't disappear" while he's taken away by Fei Wong.
Just like the true nature that surrounds him, his parents are covered in mystery. In xxxHOLiC it's stated by the fortune teller Old Lady that his parents had died and moved on to the other side. Nothing was known about them, except that they had died in an "accident". It was implied that they died trying to protect him, but it was later corrected by the same Old Lady when she spoke to Yuuko, telling her that they had just moved to another world and that they would definitely wait for their sons to come back to them.
Watanuki makes another appearance in the Clow's Future arc, when "Syaoran"'s parents are freed from Yuko's tube, and seems to recognize them a bit.
It is further explained in later chapters that "Syaoran"'s and Watanuki's parents are actually the Clones. 
Watanuki meets Yuko at the point of death (xxxHolic) and explains to him why she had created the shop, as she tells him she's dying. She states that, once she's gone she'll finally be able to grant him his wish. Watanuki still wishes to grant her wish, but she tells him that her wish is simply for him to keep on living. 
At last, Watanuki meets with both his father and his other existence, Syaoran. The three have to pay the price for "their sins" in order to leave the void they're in. It's later revealed in the Epilogue chapter that Watanuki's price was to stay in the shop and not leave until he finds a way to meet Yuko again.
Two years after the Epilogue, Watanuki is visited by the wandering troupe of Syaoran, Fai and Kurogane; and, as payback for helping him come up with a new signature, Watanuki uses his magic to allow their group to go back to Clow.
In the xxxHOLiC continuity, at least a hundred years have gone by. Watanuki has finally been granted the ability to leave the store since he has found the remnants of a dream Yuuko left for the purpose of freeing him, however, he has decided to stay there for the sake of everyone who would come looking for help.
Watanuki is set to make a return in the upcoming series xxxHOLiC Rei in 2013.
It may be suggested that Watanuki is a reincarnation of sorts of Clow Reed, both in looks and his magical abilities in Ch.204 (xxxHOLiC).