When you first set up the Apple Watch, it asks you to assign the device a security passcode to stop just anyone from picking up your watch and looking at all the stuff on it. While that passcode is an effective tool to protect your data, it does nothing to stop someone from lifting your watch, resetting it, and using it themselves or selling it.
As detailed in a post on iDownloadblog, it's dead simple to find the Watch OS reset option without unlocking the device. Long-press the side button to bring up the power menu, then Force Touch that menu to find the "erase all content and settings" button. Once you've done that, pairing the watch to a new phone works exactly the same way as it did when you took the watch out of the box.
There are also ways to erase all the data on an iPhone, iPad, or iPod Touch without bypassing the lock screen, though. All you need to do is put the device in recovery mode and then restore it using iTunes. In this case, though, the Activation Lock feature introduced in iOS 7 still works as a theft deterrent. Even if you wipe the phone, setting it up again requires the Apple ID password of whatever account was signed into iCloud on that phone. Just months after it was introduced, Activation Lock had already significantly curtailed iPhone theft in major cities, and legislation requiring a similar "kill switch" on all smartphones is already on the books in several US states.
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