Whether it's huge or not in terms of percentage error depends on the ratio of that quarter mile to the total distance. Over a marathon, it's less than 1%. 1% to 3% error is not uncommon for non-differential consumer GPS units (ever priced a GPS suitable for professional surveying?!). Try your other GPS watch or handheld unit multiple times over the exact same closed course at different times of day, different temperatures, different paces, different directions on the same course, and you might be surprised to occasionally see a few percent of difference or error as well.
The Apple Watch does not have a GPS chip, and the iPhone is not guaranteed to use its GPS receiver to measure distance. The iPhone uses Core Location, which "occasionally" uses the GPS receiver, but not always, to in order to minimize battery usage. Other times, both the Watch and the iPhone use Core Location and Core Motion to estimate distance from nearby cellular tower and WiFi access point triangulation, and from cadence.
So you need to calibrate the Watch so that the latter speed and distance estimate from cadence is accurate enough during the times while the Watch and iPhone are trying to minimize battery use (which is likely more often that you might think, even while running).
I am currently training for the fall Marathon season. One thing I will try and post is comparison on some of my longer runs. I get the feeling the watch/phone combo will be even more off.
Even if it is not, I have seen a .17 -.29 difference per run. For the amount of miles I will log that will equate to 100's of miles difference.
For people who are using this for shorter runs and getting started it is great. I would say for even moderate runners than need to look at other options for now.