Hi
How Apple Watch uses data depends on the Apple Watch model, its connection status and other factors.
When connected to your paired iPhone via Bluetooth, for data usage Apple Watch relies on the iPhone's connection to the Internet, whether via Wi-Fi or cellular data. This usage does not require a separate service plan for the Apple Watch.
When it is unable to connect to your iPhone, Apple Watch will attempt to connect, as a fallback, to a compatible Wi-Fi network.
Apple Watch Series 3 (GPS + Cellular) models have built-in cellular capabilities. This is only used when the watch cannot connect to the paired iPhone via Bluetooth or, as a fallback, to a Wi-Fi network. In order to use that feature, they require a carrier service plan for your iPhone that specifically includes support for Apple Watch Series 3 (GPS + Cellular), including the carrier activating the watch on the plan:
Apple Watch - Carriers - Apple
An activation fee and ongoing monthly cost may apply - contact your preferred supported carrier for details.
Features that are available via Apple Watch vary, depending on its connection status. The full range of features is available when Apple Watch and iPhone are connected via Bluetooth and your iPhone has access to both cellular service and the Internet (via either cellular data or Wi-Fi).
Features that are available under different circumstances are detailed here:
How to use your Apple Watch without your iPhone nearby - Apple Support
More information:
About Bluetooth, Wi-Fi, and cellular on your Apple Watch - Apple Support