He meets Qui-Gon Jinn, who is looking for a replacement hyperdrive for the Naboo Royal Starship, and his life goes down hill from there. First, Qui-Gon strikes a deal with him to get Anakin into the Boonta Eve Classic pod race, talking Watto into footing the entrance fee with the starship as collateral. Upon learning Watto was betting heavily on Sebulba, Qui-gon then makes another bet with Watto on the winner of the race, offering Anakin's pod against the boy's freedom. Anakin wins the race and Watto loses the bulk of his capital.
Anakin returns to Tatooine in search of his mother in Star Wars: Attack of the Clones. Watto is now completely down and out; having lost his former shop, he now appears to be a street peddler. He tells Anakin that he sold Shmi to Cliegg Lars.
Mind Trick Resistance
Watto claims the Force doesn't work on his species, and he appears to be right when Qui-Gon is unable to "convince" him to accept Republic credits for the hyperdrive he needs. However, it was quite out of his character to give Anakin the information about his mother's whereabouts for free the way he did in AOTC.
It's possible that Watto's statement was misinterpreted, and that his resistance to the mind trick was not genetic; he simply wasn't "weak minded" about business matters. Ten years as a poor street vendor may well have weakened his resistance, or perhaps Anakin was a far more powerful Jedi than Qui-Gon.