I spent hours with Apple iPhone support (including a senior advisor) trying to get my Apple Watch to unlock my late 2014 Mac mini to no avail. I thought that perhaps the Sierra 10.12.2 update might solve the problem, but it did not. When I clicked on the "Allow Apple Watch to unlock your Mac" in the General pane of the Security & Privacy system preferences on the Mac, it said "waiting for approval" and no code appeared on my iPhone 7 or iPad Pro. Cancel button did not work and button that said cannot approve did not work; only closing the preferences window got me out of the "waiting for approval."
Here is what solved my problem: I did not have iCloud Keychain enabled on any of my devices. When I turned iCould Keychain on for all of my devices, unlocking with my watch could then be enabled, and it works!. At last!