>...what does the iWatch actually do?
Like any computer, it depends on the software. The hardware - touch screen, rotary dial, two buttons, microphone, speaker, vibrator, sensors, CPU, Bluetooth radio - are available for the software to use. Like the iPad, there probably isn't one 'killer application', but it may be that there are enough little applications to make it worthwhile for some users. Time will tell.
Apple demoed an American Airlines app that displays gate information and departure time - potentially handy if your hands are full of luggage.
GPS navigation whilst on foot. This would certainly be more convenient than holding a phone up.
Remote control for your iTV or iPhone.
>Will you get one?
I'd personally wait for version 2, just based on the history of first gen iDevices (iPod, iPhone, iPad).
>How does it differ from other smartwatches?
Tight integration with the iOS ecosystem, and a large R&D budget. Some features seem pretty smart - such as displaying a text message, then extracting from it three plausible replies for the user to send back.