The Eye: what was it?

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I've noticed Peter Jackson has taken a lot of flack (from bookish fans) for equating Sauron's physical shape with The Eye, you know, that huge, flaming search-light on the topmost tower of Barad Dur. With some right too I'd to say, because Sauron did in all probability have a mannish, physical shape at the end of the third age and most talk about The Eye of Sauron in Tolkien's books seems to be metaphorical rather then literal - when The Eye is on someone, they have the nagging feeling of always being watched by the Dark Lord, rather than having an actual eye staring at them.

Yet one must say that the images in the movie isn't that far fetched. There was apparently some sort of eye with a search-beam on top of Barad Dur that could turn 360 degrees, through which Sauron could see from, as this quote suggests:

Originally Posted by LotR; Mount Doom

One moment only it stared out, but as from some great window immeasurably high there stabbed northward a flame of red, the flicker of a piercing eye; and then the shadows were furled and the terrible vision was removed. The Eye was not turned to them: it was gazing north to where the Captains of the West stood at bay...

So, what do you think of The Eye? What was it?