Apple introduced an activation lock system in its iOS in 2013 that served as a theft deterrent and required the user to disable iCloud password before being able to use it. Even though Apple watch activation lock was not introduced initially when the watch OS first came to the scene but with watch OS 2 or later the activation lock feature is now enabled and the users can have same type of protection for their Apple watch as with their iPhone that is paired with the watch.
Talking about any regular watch you don’t have a password or passcode to protect it let alone a theft-deterrent system. Even that major brands like Rolex, Omega, Timex and Sieko don’t have that. However, as your Apple Watch will have some of your personal data stored on it, there is definitely good amount of risk associated with it. For lessening that risk, you can set your Apple Watch to erase everything stored on it if ten failed attempts are made to bypass its passcode/password.
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However, now with latest watch os available, the Apple watch users can now enable Find My iPhone feature which automatically turns on for your Apple watch when you set it up on the paired iPhone. Now with Apple watch activation lock in place, the users need to provide their Apple ID login details before un-pairing the watch from iPhone, pairing the watch with some other iPhone or trying to turn off the Find My iPhone feature for your watch.
This allows you to keep everything safe even when your device lands in wrong hands. Furthermore, it significantly increases the chances to recover your watch. Even when the device is erased by you remotely, the Activation Lock will require the person in possession of the watch to provide your Apple ID login details to be able to reactivate it. So, just keep the “Find My iPhone” feature turned on while ensuring that you remember your Apple ID login details to have maximum security for your device.