Apple considers exercise to be activity that meets or exceeds a brisk walk,and when your heart rate goes above a certain threshold Apple Watch will begin to count it as 'exercise'
According to apple support, for the activity ring to register your workout (for outdoor walk or exercise ring) you need to maintain a speed of approx 3.3 mph or faster and increase your heart rate to approx 75% of maximum,this is their definition of a "brisk walk".If you slow down or pause the watch will stop tracking your movement as exercise credit,it will still measure your steps and calories burnt but will not give you any credit towards the exercise ring or workout app.A brisk walk speed is different for everybody as the watch takes into account your age,sex,weight and heart rate which why it is important to calibrate the watch when you set it up from new and have the correct details set up in the health app,the idea being that you're being encouraged to put more effort in to walk faster and to get your heart beating faster, if you just walk at a slow pace then you are not going to improve your fitness or get all those award badges that we all seek.