Here's my prediction: there is no watch, at least not yet. Apple is going to enter the wearable computing market with something much more radical, and yet much more obvious, in hindsight: clothing. The amount of computing power that could be embedded into something like a jacket is pretty substantial, compared to a watch. I'm not sure what you would do with that type of computing power or how you would interact with it (this idea is pretty half-baked, I admit), but I do know that it would be a hell of a lot more than you could do with a puny little watch.
I don't think Apple will be involved in the actual clothing design; rather they will provide a spec that clothing designers can build around. It will launch with a few high-profile labels, but others will be able to sign on as "clothing developers". Apple Stores will grow to include a full fashion boutique where you can shop for snappy wearable computing. This would explain Apple's recent acquisitions re: high-fashion retail. It is also one of the few markets that are so large that they could have a significant impact on Apple's bottom line, unlike watches and TVs, which are simply a sideshow in terms of potential business. By comparison, clothing is a huge market.