Possibles for an "iWatch":
1) iPhone functionality: Calls, clock (obv), notifications, Siri
2) Fuelband/up/nano pedometer, open to these kind of movement tracking applications
3) Biometrics: authentication, recording of pulse etc.
4) Radio comms: payments, passes (ski pass?), universal remote?
The potential for cross-over with these kind of functions is amazing, if not a little scary.
On form-factor, they have a choice of watch face with an included, interchangeable...