I have walked for approx 40 minutes 4 times since getting my watch, three were outside and one, this morning, was inside on a treadmill. The watch tracked all three throughout the walk and seemed to work flawlessly. The outside walks resulted in my achieving 40 minutes of my 30 minute exercise goal but this morning on the treadmill I only got 11 exercise minutes. It truly doesn't make sense because I actually worked harder on the treadmill than on our flat roads (because of inclines and interval speed adjustments).
After a bit of research I found this... per the Apple Watch manual: "Outdoor and Indoor Walk/Run/Cycle are distinct workouts because Apple Watch calculates the calorie burn differently for each. For indoor workouts, Apple Watch relies mainly on your heart rate readings for calorie estimates, but for outdoor workouts, Apple Watch works in conjunction with iPhone (which has GPS) to calculate speed and distance. Those values, along with your heart rate, are used to estimate the number of calories burned."