Curse you, Polycarp! 
I was under the impression that the Dwarves did not die out, but, lacking any firm allies after Gondor slowly faded and Elves left, simply went deeper underground and stopped having contact with men.
I think Tolkien threw out a few clues that man still occasionally encountered Hobbits in more recent times. They were even smaller and quieter and much shyer.
The Dwarves diminished in numbers but he didn’t say they disappeared.
We need to remember that the intent of Tolkien was that these were forgotten ages before out historical age. It doesn’t really work very well, but that was the intent.
Jim
Here’s a related question:
What the hell was that giant squid thing at the entrance to the Mines o’ Moria?
Why was it there?
and where the hell did it come from?
When Frodo asked Gandalf “What was the thing, or were there many of them?” Gandalf only replied “I do not know.”
GANDALF did not know anything about the Watcher(s). Tolkien gives no other information about the creature(s) that I know of, other than what’s in Fellowship.
I read the Hobbit and it’s the reason I have not read the LotR books yet. Man, sorry but the Hobbit was hard for me to read. I don’t know exactly what it was but it dragged for me.
A) You really don’t want to know.
B) Because the stars were right for it to be there.
c) R’lyeh.
Limited info on this one.
It crawled/swam out of the deep dark depths of under ground water from beneath Moria. It was drawn out by Sauron’s power as it specifically went for Frodo first (mentioned in the book)
It is important to remember that there is much of Middle Earth we did not see.
I am sure their were many other strange creatures scattered around.
I wish that Tolkien had given us more than the glimpses we got. I would have liked to explore far more of Middle Earth.
Jim
What I am wondering, I guess, is how long was this thing sitting in that lake? Did the dwarves know about it? It seems like it would really suck having to sneak past that thing every day.
In The Two Towers, it is said that:
“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.”
Obviously the Watcher in the Water was one such nameless thing, that made the mistake of journeying to the surface, and then couldn’t go back again.
And why?
Because some miserable stupid Dwarf gave it a name, that’s why!
The lake was new, the last time Gandalf had pass that way it did not exist.
So when the Dwarves used the door, the creature was not their yet.
The Company of Dwarves that Balin led, did not make use of the door it would appear except maybe once and that ended badly.
When they entered Moria, the found some Dwarven skeletons near the door.
Probably an exploration Party that got wiped out by the Orcs. It is possible they also got forces back in by the Lurker in the Lake.
Jim
That kind of makes sense. Like the lake was super deep and the WinW, normally dormant at it’s bottom was drawn to the surface.
I’m fairly sure that the film doesn’t include this, but the Book of Mazarbul, the big old tome that recorded the progress and ultimate downfall of Balin’s colony, reports at one point that “the Watcher in the Water took Oin”, and the creature seems to be part of the problem when the beleaguered dwarves say “We cannot get out”; it had woken up and was ready to snaffle anyone who tried to make it out of the west gate.
Excellent, I couldn’t recall the passage.
I thought the woken up part referred to Durin’s Bane, can anyone check, I won’t be able to until tonight.