And the next step is embedded. Chip implanted in belly button.
Seriously, though, it's not a big leap to think of driving a car with no pedals or steering. For those occasions when the car isn't driving itself, you simply wear a computer and it communicates with the vehicle over an internal Bluetooth or WiFi network. The display can be a heads-up display on the windshield.
The big downside to this will most likely be a change in the battery life paradigm. My old pre-smart phone was pretty much a charge-once-a-week device. My smart-phone needs a charge every day.
The phone comes with a lot of extra utility in exchange for that battery limitation, but I feel much less secure knowing that if I find myself without power, I'm never more than a few hours away from having a dead phone.
I would guess that we'll need to make a similar but more extreme trade off with this sort of a watch. Instead of two years between battery changes, it might very well be two days between charges.
On a related note; remember the Microsoft Smart Watch? Usually MS follows Apple's successful product with a sub-functional product. This time Apple will be following MS's sub-functional product with a successful one.
Re "some advertising super-imposed on my real view."
More than once, I've run across some starry eyed marketer that "just knew" the people would appreciated targeted ads on their PDA, cell phone, smart phone... Some people really don't understand human behavior.