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Walter starts out as Jacob's enemy and ends up as his friend. (Aw.) The path is somewhat arduous and tough, though. It takes a long time for Walter to trust Jacob. At first he doesn't even let Jacob call him by his real name; he has to use his clown name, Kinko. Once Jacob earns the right to use Walter's real name, things start to change. It's amazing what not using someone's clown name can do.
Walter's had a hard life. He's a dwarf whose mother sold him to the circus, and he had to make his own way from then on out. He doesn't seem to have much of a sense of humor, he doesn't like to share, he's incredibly particular about his personal space, and he likes to read classic literature. This sounds like the opposite of a clown, actually.
Walter completely loves his dog, Queenie, as much as any other character loves anything in the book. In fact, we see Walter at his worst when Queenie gets lost right before the circus train pulls away from a town. He is inconsolable and doesn't want to leave without her. (Don't worry, she makes her way back.)
Our clown also turns out to be courageous and kind. He agrees to help Jacob take care of Camel, even though it puts all three of them in danger: "[He] stares at me, tapping his fingers against his leg. After half a minute of silence he says, 'All right. Bring him on over. Don't let anyone see you or we'll all catch hell.'" (14.253). Walter repeatedly tries to protect Jacob and warn him about the danger he's in. Ultimately, though, Walter's actions don't protect any of them.
In the end Walter doesn't receive the same protection from Jacob. Jacob chooses to go after August, using Walter's knife, at the exact moment when circus toughs come to their quarters to red-light them all (throw them off the train). He leaves Walter and Camel behind, alone and defenseless.
It's hard to know whether Jacob ever forgives himself for this. He debates long and hard about what might have happened if he'd left Walter's knife behind, or if he hadn't gone out in search of August. But all that thinking doesn't help Walter, who took a punishment Jacob knows was meant for him.