How do I restore the 'Use your Apple Watch to unlock apps and your Mac' option in macOS Big Sur?

I understand the "Use your Apple Watch to unlock apps and your Mac" option in System Preferences > Security & Privacy > General has gone missing. That is certainly disconcerting.

I assume you already restarted both the Mac and the Watch?

Restart Apple Watch

Shut down or restart your Mac

Do both, in no particular order.

You might as well restart its paired iPhone also.

If things get desperate signing out of iCloud and signing back in again on all affected devices becomes justified.

For reference: Unlock your Mac with Apple Watch - Apple Support