What it could do...
List of things that the iWatch (but don't think of it as a watch) could be used for other than just a watch and as an extension of an iPhone:
- proximity password/key (can't use iphone unless it's near, open doors or even start your car)
- facetime
- health and sports (pedometer, heart rate, Nike+, etc.)
- quick map
- appleTV Remote
- simple notifications (email, text, voice) with white text on black background for the annoying texters during movies
- sports, stock, etc. updates that can be looked at when you shouldn't be looking at your phone
- Siri, to do most anything without having to get your phone out of your pocket, purse, etc. (make phone calls, texts, etc.)
- music player
- GPS
- NFC
- proximity from iPhone alert
- Find My iPhone/iPad
- most of the above but also with your desktop/laptop
- camera?
And if it were waterproof
If it's to be used without an iPhone, I believe it will lack a lot of the functionality that could make it truely awesome. IMO, let the iPhone do most of the work and use the "iWatch" as mostly just a watch when the iPhone isn't around. Of course certain things would still work great without the iPhone being around (proximity password/key, health and sports tools, appleTV Remote)