Capacity?

Storing music on your Apple Watch:

"Your Apple Watch playlist is limited to 1 GB by default. In the Apple Watch app on your iPhone, you can change this setting to 2 GB, 500 MB, or 100 MB. If you prefer to limit by song number, you can limit your playlist to 15, 50, 125, or 250 songs."

Listening to music that is stored on your iPhone:

"When your paired iPhone is in range, you can use your Apple Watch to listen to any music stored on your iPhone."

Both from: Listen to music on your Apple Watch - Apple Support

Photos:

You can choose a photo storage limit within My Watch in the Apple Watch app (on the iPhone), with choices ranging from 25 photos / 5MB up to 500 photos / 75MB.

Total storage is 8GB. No idea how much of that is used for the operating system, or how much room apps take up

According to General>Usage on the Watch app on the iPhone, there is 5.6 gigs avalable. I have 28 apps loaded on mine, no music. Shows as 609 MB used.

Of the 8GB total memory, around 6GB is available for user data under watchOS 1.0.1.

The Apple Watch app (on the iPhone via My Watch > General > Usage) shows both the total amount of memory available and the total storage used so far by each app on the paired Apple Watch.

For example, my Watch has 469MB used and 5.8GB available. The usage covers all apps including Music, Photos, Mail, Passbook, Messages, Contacts, Calendars & Reminders, third party apps, etc.

NB When watchOS 2 is released this fall, many apps will become native (ie living and running entirely on the Apple Watch).

It seems logical to assume that native apps will consume more memory than their direct, non-native equivalents (which run from the iPhone, transferring data back and forth).

Among the benefits of native apps is that they will therefore run faster.