Dylan's images have the same timeless quality as many Old Testament stories. This song mocks the rich, falsely secure "princes" of the world and warns of a Day of Reckoning. The title of the song alludes to an Old Testament Biblical verse, in which two riders on horseback deliver news of the fall of the ancient city of Babylon.
Title, Verse 9: The image of the watchtower is an allusion to the Book of Isaiah, Chapter 21, verses 5-9: "Prepare the table, watch in the watchtower, eat, drink: arise ye princes, and prepare the shield./For thus hath the Lord said unto me, Go set a watchman, let him declare what he seeth./And he saw a chariot with a couple of horsemen, a chariot of asses, and a chariot of camels; and he hearkened diligently with such heed./...And, behold, here cometh a chariot of men, with a couple of horsemen. And he answered and said, Babylon is fallen, is fallen, and all the graven images of her gods he hath broken unto the ground."
Verse 8: The expression, "the hour is getting late" has an obvious literal meaning that it's getting late in the day, and the sun is probably setting. But the late hour is also a metaphor for the approach of a Day of Reckoning (Judgment) or the Apocalypse from the Bible. In some vague sense, the world may be coming to an end.
Verse 12: The two approaching riders may be a very indirect allusion to the Four Horsemen of the Apocalypse from the Book of Revelation, the final book of the New Testament.
Dylan often draws on the mythology of the American West, like gamblers, prostitutes, and outlaws. In this song, he draws on the loneliness and cultural isolation of the West, and the watchtowers are literally the last "frontier" of civilization.
Verse 1: Calling the two characters the "joker" and the "thief" is a form of metonymy, where some attribute of a person or thing is taken as representative of the whole. In this case, joking and stealing are actions that represent the essence of these two men. It's not all they do, but for the purpose of the song it's all that matters. Also, it's just our interpretation, but the joker and thief seem to belong to the general class of outlaws, which fits in with some of the other symbols of the American Old West in the song. In the mythology of the West, just like in this song, people who live at the margins of society are often the most virtuous. (Another example is the prostitute with a heart of gold.) Thus, we like the thief and even think he's kind of wise – even though he's a thief.
Verse 8: Again, this might be a bit of a stretch, but the image of dusk or sunset implied by the expression "the hour is getting late" seems to belong to the mythology of the American West and cowboy culture. Think of the moment in Western films when the sun is setting and the hero is about to be caught in a dangerous place after dark. A moment like this occurs in the first Star Wars (well, Episode IV), when Luke Skywalker has to hang out in Old Ben Kenobi's cave to avoid the Sand People who come out after dark. (And if you don't think Star Wars is inspired by old Westerns, think again.)
Verses 11 and 12: The last two verses of the song present more imagery of the West. The growling wildcat, the slightly scary approach of two anonymous riders, and the howling of the wind add to the suspense and make us think that something is about to happen. Wildcats were a fearsome aspect of frontier life, and this legacy remains with us today: think of how many American sports teams are named after them.
The song contains no scenes of violence, but you get the sense that a battle is taking place – or has already taken place – somewhere else. The watchtower provides an illusion of permanent security, but history has shown again and again that cultures that overextend themselves risk disaster. The end of the song may be a depiction of the moment the war "comes home" to the citizens of the walled city. This city could represent America during the the Vietnam War.
Title, Verses 4 and 9: The reference to watchtowers and to people "along the line" of watchtowers belongs provides both a symbol and an allegory of warfare. The symbol is, obviously, the watchtower. It is a position of power and security, but it's also the sign of a city on the defensive. And the city being protected by the watchtowers is a natural allegory for Americans in the second half of the twentieth century: rich and powerful, but with lots of enemies and a definite need to protect itself from strange foreign threats. America is not actually a city, and certainly not one with "barefoot servants" – that's why it's an allegory. You could easily go one step further and say that it represents America during the Vietnam War, although Dylan might get mad at you because he didn't like when people insisted on a particular interpretation. But the watchtower is a symbol of Vietnam because the French built them all over the country after they colonized it.