The first time, the making of the clock was felt by the Mandala of the History Monks of Oi Dong and Lu-Tze was dispatched to sort it out. However, he got stuck in Überwald because every mountain sprouted at least one castle. It wasn't until lightning struck that he could work out which one contained the clock. No-one can outrun lightning, though, and when the clock struck it destroyed history. The clock trapped Time herself, and thus all time on the disc stopped. According to the legend one part of the clock was not made of glass - the spring, and it broke under the strain, freeing Time and causing the inventor to age one thousand years, according to the legend in any case...
This event had shattered time across the disc, and it took the History monks over 500 years of their own reckoning (they have their own method of counting time based on a pulse rate) to fix it up so that it was in some recognisable order. Of course, some of it wasn't perfect, but they did it - and erased the making of the clock from that history.
Some things live on in the sum of human experience, however, and the story was written down as a fairy tale.
The second time, Lu-Tze again tried to stop it, but it took the combined efforts of the Four Horsemen of the Apocralypse, Kaos, Susan Sto Helit and Lobsang Ludd to actually defeat the Auditors and return history to its accepted form.
It has been noted that two Discworld novels are playing out in tandem here. As Lu-Tze and Lobsang enter Ankh-Morpork in a stretched moment of sliced time, they move through a shoot-out between Watchmen and unspecified villains. Lobsang is cautioned not to interfere with causality by diverting a crossbow bolt, seemingly hanging in the air, but which looks destined to hit a Watchman. Then they go off to deal with the Clock. Somewhere in the city, Samuel Vimes is just about to end up on the roof of the Library, attempting to arrest Carcer as a raging thunderstorm seems to happen from out of nowhere. As the lightning strikes, Vimes and Carcer fall through the roof of the library... and thirty years into the past. The events of Night Watch are in one sense a direct result of those of Thief of Time, and Night Watch, where Lu-Tze (as part of putting Time and History to rights after the glass clock thing) assists Vimes in returning to his present, can be justly said to be a sequel to Thief of Time. Or a prequel. Or a coquel. Or something.
Although there is a metaphor in The Great Grandfather' to the state being like a glass clock (where you can see what's going on) there is no fairy tale about a glass clock.