So how does this do heart rate tracking? Do you need to have it strapped near your chest for that or do you need full skin contact for it?
I can't tell you how they do heart rate tracking, but I can make a good guess, based on my own experiments.
A couple years ago, I was investigating the use of an iPhone for respiration monitoring. I wanted to write an app to help people discover possibly undiagnosed sleep apnea.
We started by finding an already-existing app for recording iPhone sensors, and we did several test sleep sessions. We initially thought that the best place to put the iPhone would be laying on the subject's chest. We experimented, and found that actually the best place is on the stomach. We used a "sports wallet" (basically a thin fanny-pack) to secure the iPhone in place.
This was about the time that Samsung phones started catching on fire. We abandoned the project for obvious liability reasons. We decided it was not prudent to encourage folks to sleep with an iPhone on their stomach! It needs to be a smaller device with a smaller battery with less potential for disaster.
Anyway, not only were we able to get a reliable signal for breathing, but to my surprise, we could also get a reliable heartbeat. Both were visible to the naked eye in the plotted data, though the heartbeat was a bit muddy. Both could be reliably recovered with Fourier analysis.
The position at the belt-line shown in the photo would be ideal, according to our findings. An accelerometer could easily pick up both respiration rate and heart rate at that position, at least for a subject sleeping on their back. Standing, I dunno, might be possible.