The group I play with uses a character called The Little Girl. She can peek each night at everyone else and see who the werewolves are, but if the werewolves spot her she's dead. It seems that in the right hands, this could be a hugely overpowered position. Anyone else use it?
We've played a lot of Werewolf, both with and without the Little Girl. One thing we've done to make sure the Little Girl works properly is adjusting lines of sight. Before even handing out the roles, we make sure that everyone can easily look at everyone else's face. It sounds simple, but we've found that it makes the Little Girl much more cautious - and the Werewolves more attentive.
I have mostly played the game with this character, almost never without, so I can't really compare. That being said, from our experience as a group, and from my personal experience of having been The Little Girl myself quite often, this character actually isn't all that powerful, and certainly not "hugely overpowered". Whether I have seen the wolves or not, I still have just one vote, and I still have to defend it against others' views (with 10-15 people, our group is rather large).
Of course, I can always say "listen up, people, I am the Little Girl, so follow my advice", but a) people don't have to believe me, since b) I might actually be lying, and most importantly, c) the wolves will pay special attention to me from then on, and I'll probably get killed the very next night.
Of course, The Little Girl does become quite powerful when she's also the Village Chief, but then again, so does pretty much any character. Besides, from our experience, a Village Chief is even more likely to get killed quickly. I would say the game is pretty well-balanced, actually.
Our box set has the Little Girl, and it works fine.
Advantages: The Little Girl (with a little skill/luck) can find most (if not all) of the Warewolves. How many depends on where they're sitting relative to the wolves.
Disadvantages: If you get caught, you're dead - and since everyone else is sitting still, your ability to look around is limited. You still need to convince people. And the more you let on that you know they're the Wolf, the more likely you are to get eaten the next night. (I suppose the Wolves could just look at you really closely, but my experience is they just get eaten in retaliation).
To add to the other answers, one more variant involving the little girl, that can potentially be a lot of fun:
Sometimes, in order to make things more interesting for the villagers, we keep the number of werewolves secret to the players (only the game master knows how many werewolf cards are in the deck). Thus, the village never really knows how close they are to winning (we agree on a specific range before the game, for example "there will be between 3 and 5 werewolves"). In this situation, we have house-ruled that the Little Girl is allowed to full-on open their eyes and look around, thus pretending to be a werewolf. They are, however, not allowed to explicitly vote for killing someone. This requires some acting from the Little Girl and, also, it requires a little trust in the group.
It creates uncertainty for the werewolves, and is just generally a more interesting game.