Severe Thunderstorm Watches - what are they?
A Severe Thunderstorm Watch is a short-fuse bulletin issued by the National Severe Storms Forecast Center (NSSFC) also referred to as the Storm Prediction Center (SPC) when there is a high probability of severe thunderstorms occurring in or around the watch area. Severe thunderstorm watches take into effect many synoptic and mesoscale features, and should provide a heads up to potentially severe weather. Thunderstorm watches are often followed by thunderstorm warnings.
When severe thunderstorm watches are issued, they are entered in the AFOS system where they are routed to the central AFOS facility in Maryland and then disbursed through various channels. One of the quickest ways to get severe thunderstorm watches is through the StormWarn email delivery service.
A Severe Thunderstorm Warning is a short-fuse bulletin issued by the National Weather Service when a severe thunderstorm is present or imminent in the warning area. Severe thunderstorm warnings can be issued when the Doppler radar indicates a thunderstorm of sufficient reflectivity or exhibiting other features common with severe convection. A severe thunderstorm warning should be taken seriously - many tornados strike with only a severe thunderstorm warning in effect.
When severe thunderstorm warnings are issued, they are entered in the AFOS system where they are routed to the central AFOS facility in Maryland and then disbursed through various channels. One of the quickest ways to get severe thunderstorm warnings is through the StormWarn email delivery service.
About Thunderstorms

A thunderstorm is an atmospheric process by which the atmosphere in a mesoscale region is stabilized through violent heat exchange between the lower and upper atmospheres. Through the atmospheric processes of diurnal heating, UV radiation, moisture advection and other factors, the lower atmosphere (typically referred to as the boundary or mixed layer becomes excessively warm and moist. If the temperature gradient is great enough between this boundary layer air mass and the cold, dry air in the upper atmosphere, the lower atmosphere becomes bouyant and its warm, moist air attempts to rise (called convection)- at this point it is considered to be unstable. If allowed to rise without a strong lift mechanism or some inhibition, that air mass would cool as it rises slowly upward at what is called the adiabatic rate (typically a few degrees C for each 1000 feet). When the temperature approaches the dew point, the air cannot hold the moisture that it has and so it condensed into water droplets, which we see on a large scale as a cloud. If allowed to continue its ascent, more moisture would become water droplets and these droplets would grow until their weight causes them to fall in the form of rain. This produces a common rain or thunder shower.
If, however, an inhibition to convection exists and/or a strong lifting mechanism is present to accelerate the rate of convection, the atmosphere can be thought of as a pressure cooker - the inhibition, usually caused by an inverted layer of air (warm air over cold air) in the middle atmosphere called the "mid level cap" or just "cap". This cap inversion is very common and if strong enough, prevents convection from breaking through from below. This is sort of like the lid to a pressure cooker - if the air below the cap continues to warm and become more moist, the lower atmosphere becomes extremely unstable because it can't rise and thus stabilize itself. If the cap then begins to weaken and/or the lifting mechanism (usually provided by a cold or warm front) is strong enough, the lower atmosphere will finally break through the inversion layer. This is something like the eruption of a volcano - all that force and pressure trying to get out, and tons of rock and earth keeping it from doing so, until the pressure becomes so great that it finally breaks through.
When the breakthrough occurs, it can be very violent and rapid convection occurs as the air mass in the boundary layer attempts to skyrocket upward to stabilize the atmosphere. As the air cools, it condenses rapidly and becomes a cumulus cloud. With the release of latent energy caused by water condensation, convection is further accelerated and within minutes a towering cumulonimbus cloud is forming. Sometimes they can get up to 60 or 70 thousand feet high! As heavy rain, lightning and strong winds begin to be produced as the process continues, it becomes a thunderstorm.
Once formed, a thunderstorm exists for one purpose: to destroy itself. It's mission is to stabilize the atmosphere, which means working against the very conditions that produced it. A thunderstorm can be thought of as a huge heat machine. It is fundamentally nothing more than a mechanism to pump warm, moist air from the lower atmosphere into the upper atmosphere, and draw cold, dry air from the upper atmosphere down to the lower atmosphere. It thus works to weaken the temperature gradient that caused it in the first place, by cooling the boundary layer and warming the air above it. Once the gradient is sufficiently weakened, the boundary layer air is no longer buoyant and ceases to convect upwards. This cuts off the inflow of the thunderstorm, so once the storm is finished dumping its moisture, it ceases to exists. While the thunderstorm is active, a number of processes are occurring that produce the weather we normally associate with thunderstorms: strong winds, hail, lightning, heavy rains and tornados.
At the core of the storm, warm moist air is being sucked upward in the updraft which is usually near the rear (typically southeast) of the storm. This is called the inflow, and this can cause strong winds around the rear of the storm as nearby air is drawn into the inflow. If inflow is strong enough and some vorticity is present (usually caused by the upward tilting of horizontal rotation (called helicity) which the recent VORTEX research project has associated with outflow boundaries and other mesoscale anomalies) then the updraft column begins to rotate, which lowers the pressure in the core of the updraft, which further strengthens it. The low pressure causes the moisture in the rotating air to condense and form a cloud called a funnel cloud. If this continues long enough, the rotation extends downward until it reaches the ground, at which point a tornado has formed. Ascending air in the updraft cools until it condenses and is thrown out the top of the storm whereupon it spreads outward. The water contained in this air is then dumped downward, especially immediately in front of the updraft area, where the heaviest rains occur. This is called the outflow of the storm. Sometimes the outflow is accompanied by a strong downburst (either a microburst or macroburst, depending on its size) of air that, upon striking the ground, spreads outward along the surface as strong winds, the leading edge of which is termed the "gust front". These winds can exceed 100mph and can be as damaging as some tornados. Often bow echo (a certain kind of multicell storm) storms are characterized by strong gust fronts or downbursts.
If you experience a gust front, you'd better take shelter because in a minute or two you'll be hit with the leading edge of the rain outflow - the heaviest rains of the storm! The upward and downward motions within a thunderstorm causes air to rise above and fall below the freezing point, upon which moisture changes from water to ice and back to water again. There is something about this process that tends to create an electrostatic gradient in the thunderstorm cloud (called a CB for short). The top of the CB becomes positively charged and the bottom negatively. If the gradient is strong enough, electrons from the bottom of the cloud will discharge to the top in the form of lightning (called IC lightning or intracloud lightning). A negatively charged cloud base repels electrons on the surface and thus causes a positively charged surface. A discharge from the cloud to the ground is called CG lightning (cloud-to-ground lightning). Further, the freezing and melting of particles causes them to grow as layers of ice are added to them with each ascent above the freezing level. If allowed to rise and fall repeatedly enough times, eventually its weight will cause it to drop to the ground as hail.
Thunderstorms have been known to produce hail as large a grapefruit! More financial damage is caused by hail than any other weather (even tornados) from a thunderstorm, mostly because of the extensive crop damage it produces in Midwest farms.

Contributing Source and for more Information: http://www.stormwarn.com/rants/severe_thunderstorm_warnings.html