- "Concealed within his fortress, the lord of Mordor sees all. His gaze pierces cloud, shadow, earth, and flesh. You know of what I speak, Gandalf: a great Eye, lidless, wreathed in flame."
The term is often used to apply to Sauron himself within The Lord of the Rings, and, as a result, Peter Jackson actually depicted the Dark Lord as a floating, fiery eye in his Lord of the Rings movie trilogy but also, in the extended cut of Return of the King, when Aragorn looks in the palantír for a moment he sees in the Eye's pupil Sauron in his armour from the Fellowship of the Ring prologue, holding the palantír of Minas Morgul, as if the Eye was a chamber with its pupil being a window. That is consistent with Tolkien's letter stating that "Sauron had a humanoid form, large, but not gigantic" and also, with the description in the books in which the Eye is on the top-most floor of the Tower. Therefore, many fans regard the Eye as an illusion Sauron created around his palantír. However, this could just as easily have been a meaningless vision (like the image of Arwen lying dead) that Sauron, in the form of the Great Eye, showed to Aragorn through the palantir. In Tolkien: The Illustrated Encyclopedia published in 1991, author David Day states that "in the Year 1000 of the Third Age, he [Sauron] manifested himself in the form of one great, lidless Eye. It was like the eye of a huge cat, wreathed with flame, filled with hate, and ringed in darkness." This portrayal is incorrect and is directly contradicted by a letter in The Letters of J.R.R. Tolkien in which it is stated that Sauron had a humanoid form at that time, large, but not gigantic (Letter 246), so that is simply Sauron's "telescope" or "X-ray vision", NOT himself. (See Evil Eye for more details) The Eye of Sauron was also depicted in the 1980 animated version of The Return of the King. In this version, the Eye is not within or on top of Barad-dûr, but in the sky above Mordor. It is only visible when the clouds part. It could be inspired by the fragment of the chapter "The Ring goes South": "But low in the South one star shone red. Every night, as the Moon waned again, it shone brighter and brighter. Frodo could see it from his window, deep in the heavens, burning like a watchful eye that glared above the trees upon the brink of the valley."
The Eye of Sauron is a metaphorical representation of Sauron's power. The letter by Tolkien mentioned above should clarify for the Sauron had a physical from. It specifically says, "Sauron should be thought of as very terrible. The form that he took was that of a man of more than human stature, but not gigantic". Gollum, who has likely been tortured by Sauron himself also mentions how Sauron has only four fingers on the Black Hand, "but they are enough."
The Eye is a metaphor for his gaze, that few could endure. Perhaps only the bearers of the Three Elven rings could have done it. In some instances it is mentioned in reference to his apparent ability to see everything. He has this power due to the Palantirs he controls, of which there were two still in use.