• Interactive notifications that work like proxy apps: Any Watch app should be able to push an interactive notification that doesn’t get dismissed when interacted with, but is always accessible from the notification center. E.g. interacting with key features of an app like Netflix or Pandora without having to launch the full app. Although this seems like a small usability concern, it would reduce friction hugely and make the Watch a go to device for quick, frequent use cases.
• Bump to add contact: Users wearing Watch bump their fists and add each other in Contacts.
• Knock to lock/unlock Macbook: There is already the successful KnockToUnlock app that uses smart geo-location and bluetooth to unlock a paired Mac by simply knocking on the phone. Would be a very cool and useful feature to be able to unlock the Mac by tapping on the Watch, using Apple Id without requiring any 3rd party app.
• Improved running assistant: Use haptic feedback to indicate to the user of their change in pace while running, biking.
• Hardware camera: A very large number of photos taken on phones everyday are selfies. Camera on the watch will make selfies so much more fun and eliminate using the phone.
• Battery improvements: Recharge the battery through body heat or solar.
• Touch ID: Allowing payments and other interesting ideas that take security as a major concern to be built off of the Watch.
• Improved 3rd party app experience for Passbook: Passbook seems like a great idea that has not fully rooted in the ecosystem. Apple needs to to get more apps to leverage location, time, context to bring a consistent experience for passbook and notifications that can be a much improved user experience using them on the phone.
• User status: System wide status updates that can be consumed by other apps. Maybe a simple gesture to set a pre-defined status message (at the gym, busy working, taking a nap). Would be immensely useful for real-time apps specially messaging and phone.
• Smart notifications algorithm: Watch should not just take every notification and alert the user. It should instead act as a gate-keeper, a curator of the user’s attention. Using information such as time, the type of app, user’s history of interacting with that type of notification, upcoming reminders and meetings, the Watch should decide to show a notification or not.

Some of the ideas might not be directly features for the Watch but more or less an improvement in the ecosystem. Some might not be possible technically (at least not yet).

That should not stop us from dreaming up the range of things that we would like it to do