Here's the way I see Smartwatches, explained in a few nice little scenarios.
-Regular Mechanical Watch
"Hey, Bob! What time is it?"
:Looks at wrist:
"It's 5."
"....k."
-Smartwatch
"Hey, bob! What time is it?"
:looks at wrist:
"It's 5, also my bloodpressure is 107 over 74."
"...k."
Now let's get into the expanded functionality of a Smartwatch.
-Smartphone
:Bob is walking along, minding his own business when suddenly his phone starts buzzing on his thigh:

ulls out phone:
"Holy poop! My grandma called! I better see what's up!"
:Makes phonecall:
-Smartwatch
:Bob is walking along, minding his own business when suddenly his watch starts buzzing on his wrist:
:looks at wrist:
"Holy poop! My grandma called! I better see what's up! Also, I've walked 6 miles!"

ulls out phone:
:Makes phonecall:
Now there are advantages to a Smartwatch. The senors on the bottom attest to that. But for a lot of things that aren't health related, it's pretty redundant, not really offering anything you're not already getting. For phonecalls, text messages, and whatnot, it's a notification center on your wrist. You still have to have a smartphone on you to both get them and reply to them.
They don't completely replace anything. Rather, they act as an extension to the things you already have. It's for this reason that I don't consider them The Next Big Thing. They're accessories for your accessories. Now with that said, I don't think they're going to fall flat in the market. I have a feeling the Apple Watch is going to be a modest success. But it won't sell in the hundreds of millions.
What I'm arguing against are all these people who keep saying "people said the same thing about Product X, and look how that turned out. The Apple Watch is going to be HUUUGGGEEE". They're basically countering a fallacy with another fallacy. They're not taking into account that Product X offered a truly better way to do things, and assume that just because some people shot it down before it hit it big, then obviously the naysayers are just as wrong now.
Smartphones replaced regular cell phones because they act as a central communications device. It covers everything from phonecalls, to emails, to the internet in one convenient, highly portable package.
Tablets became a success because they're easier to use, generally more stable, and more convenient than traditional laptops. For some people, an iPad covers their use cases far better than a Macbook Air.
...so what do Smartwatches replace entirely? Nothing. They assist the things we're already using, and offer a couple of very specific health related features. Are they handy? Certainly. Will they change the course of every day life? Nope.
This is why the Apple Watch won't be the next iPhone or iPad.