The Owl's Eye is a key item in the Ninja Gaiden for the Xbox, found and used in "The Path To Zarkhan" chapter. Once obtained it allows Ryu to see in very dark places. It was removed from Ninja Gaiden Sigma and Sigma Plus, in an effort to minimize puzzles.
In "The Path To Zarkhan" chapter, Ryu will encounter an underwater combination lock which he must input code "0971", but it is too dark to see. If he continues to swim right from this location, he will come to a small area with a treasure chest at the bottom of the underwater floor that contains the Owl's Eye.
Once obtained, Ryu can then input the code and proceed to the next area. Both the lock and Owl's Eye are non-existent in Ninja Gaiden Sigma, instead in its place are spike traps.