The enemy stops moving when Link has this. Mind you, it works only for the screen he's on at the moment.
Clocks are items dropped by Enemies in The Legend of Zelda. If Link picks up a Clock, all Enemies currently on the screen will immediately freeze in place indefinitely, vulnerable to Link's attacks.[1] If Link leaves the screen he is on, the effect will end. Even if Link touches the frozen Enemies, he cannot be harmed by them while a Clock is in effect.[1]
The following section is not part of the Zelda canon and should not be taken as such.
In The Shadow Prince, the Clock makes another appearance, serving the same function as in The Legend of Zelda. By moving the small knob left of the numeral XII, the Clock will halt time for anyone except its bearer, but as soon as both hand knobs reach XII, time will go back to its normal pace.
The Clock is first introduced in the book when Impa gives Link the Clock after the young hero decides to wait and not confront Charles of Moria. The Clock is not used in the book unless Link accuses Charles of being evil without having the Mirror of Truth to back it up, in which case he will be sent to a jail cell in the Tower. He uses the Clock to halt time and proceeds to utilize a toothpick to push the cell Small Key out the keyhole; afterward, the young hero slides a paper under the door to drag the key back in, which he uses to unlock the door just as the Clock is about to return time to its normal pace. Link then quickly heads out the door.
