Backup how does it work for the watch?

Just for my curiosity and knowledge does the Apple Watch use the same mechanics of the iPhone in terms of backup data in the cloud? Example, if for any reason, such as password forgot or whatever you need to reset to factory setting the apple watch can you make a restore from a backup or do you need to sync again all the info from the apple watch app on your iPhone? How does it work? I am pretty sure that I understood that when the apple watch is paired with the iPhone it continuously sync data with the iPhone and the iPhone itself does the cloud back up but I would like to know more about it. Thank you so much and have a wonderful day.