It is mentioned in a note, in which a worker thinks that an alligator lives down there. Other notes can be found that say the monster killed two of the workers. The writer of the note claims that he will kill the creature, and that if someone (in this case Heather Mason) reads it, that means that he failed to do so.
The creature itself can be found a little further on, in the water below the path that Heather must cross. The first time Heather crosses the path, before reading the note, the creature can be seen moving below her for a few seconds. She must kill the monster with a hairdryer before passing by, or it will grab onto her leg and pull her into the water. Its appearance looks like a rather small eel, or leech-like monster with no visible mouth or eyes, and is flesh-pink in color.
It is unknown what the monster actually is. It is possible that Heather, after reading notes about a creature dwelling in the sewers, actually developed the image of it herself. What the workers actually saw could have been an alligator or some other creature. This may not be the case, as the scenario still triggers even if Heather does not read the notes. At the same time, it could symbolize Heather's fear of the unknown. It may also symbolize Heather's and Alessa's hatred of insects and snakes.
Another theory is the Sewer Monster is a reference to the Bloodsucker from Silent Hill, as they are both worm-like in nature, have a similar meaning, and can kill the player if they try to advance without killing the monster beforehand. Both are also invulnerable enemies in the series.
There is a running theme of maternity and femininity in Silent Hill 3 and its monsters due to the central conflict of the game centering on impregnation in the cult's attempts to force Heather to birth their god. The Sewer Monster could be seen to resemble a severed umbilical cord.