Hi
The full range of features is available when Apple Watch and iPhone are connected. Whenever possible, the devices will connect via Bluetooth, but they can also connect via Wi-Fi if a Bluetooth connection is unavailable.
You don't necessarily need to have your iPhone on or immediately around you (within arm's reach, for example) for the devices to establish and maintain their Bluetooth connection. Normal Bluetooth range is around 33 feet / 10 meters, but this will vary in practice due to wireless interference.
Whenever your watch can't connect to the iPhone, it will attempt, as a fallback, to connect to a known, compatible Wi-Fi network. It then still offers a number of features, including sending and receiving messages via iMessage. If your carrier offers Wi-Fi Calling and it is supported on your plan and enabled on your iPhone, you can also still use Apple Watch to make calls and (subject to carrier support) send and receive texts.
If your watch is unable to connect either via Bluetooth or Wi-Fi, it again still offers some - although fewer - features.
Features that remain available in each case are detailed here:
How to use your Apple Watch without your iPhone nearby - Apple Support
For the best performance from your iPhone and Apple Watch, including the most power-efficient communication between them, Apple recommends keeping both Bluetooth and Wi-Fi permanently enabled on your iPhone.
More information:
About Bluetooth and Wi-Fi on Apple Watch - Apple Support
Make a call with Wi-Fi Calling - Apple Support