Overwatch is the name given to the Combine military forces on Earth. These are the blue, orange, and white (elites) heavily-armored soldiers. These units are special because they are transhuman. They have been physically altered and brainwashed into serving the Combine.
The first time one is seen is immediately after the helicopter battle in Water Hazard. One pilots the helicopter, and his body will drop out as it explodes (or sometimes shortly before).