According to the rumors, Microsoft has just put in a bunch of orders for 1.5-inch displays for use in the watch, which is being developed by the very same teams that deal with Kinect and Xbox accessories. The watch will be touch-capable, of course, but other than that details are quite scarce. Apparently the watch has a five-pin connector just like the one on the Surface, capable of transmitting both data and power. The watch is only a prototype at the moment though, so that could just be for debugging.
What with Microsoft's SmartGlass tech, it seems like there would be some space for a Microsoft watch to slide right into the Xbox device ecosystem. But we'll just have to wait and see if that can make them worth wearing. [The Verge]
Report: Microsoft's Smart Watch Is Coming from the Xbox Team