Watts' scholarship is impressive, yet even more impressive is his ability to communicate what he knows. The Tao Te Ching is not the easiest book to read, but you wouldn't know that from Watts' Watercourse book. Everything is very clearly presented. Lacking are the word-games Watts sometimes likes to play in his other books. His rather lengthy discussion of "li" would have been worth the price of the book all by itself, but there was just so much more. Far and away, this is one of the best books on Taoism I have on my shelf. I have been reading a lot of Watts lately, recently introduced to him by an acquaintance, and it has been one of the best adventures of my life. Among all his books, this is one of my favorites.
This is Alan Watts' final work, left incomplete upon his death, "finished" by Al Chung-liang Huang. Many sections of the work seem sketchy and undeveloped, which is unsurprising.
That said, that which is there is as well-written as any of Watts' other prose. As an "introduction" to Taoism, it is somewhat lacking, but it's a good work to pick up after you're already familiar with the Tao Te Ching in common translations. The chapter on the method and beauty of the Chinese written language is a notable highlight.
In short, if you're looking for an introduction to Taoism, start with the Tao Te Ching; if you're looking for an introduction to Alan Watts, start with "The Way of Zen". But the fact that this book doesn't fulfill either of those purposes well doesn't detract from its good points.