If you wanted to be generous, you could say that it's about characterization. Like costumes, watches and other accessories provide filmmakers an opportunity to say things about a character that the viewer can perceive at a glance. One of the better examples of this is the Casio calculator watch worn by Bryan Cranston's character in Breaking Bad.
However, 9 times out of 10, it's all about product placement. Characters wear watches - particularly luxury watches - in films because the watchmaker pays for them to be there. This explains virtually every automatic luxury watch appearing on the wrist of, say, soldier characters in action films. The example that springs to mind is the extremely unsubtle appearance of an IWC pilot watch on Jeremy Renner's character in the Bourne Legacy.
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