Phone connection meaning that it displays info from your phone.
Basically on the market today you have health trackers (fitbit, fuel band, etc.) and smart watches (Galaxy Gear, Pebble, etc.) the former gives information to your phone, and may receive some light information back. The latter goes both ways, giving information but also receiving it. iWatch wouldn't be very good unless you could view text alerts etc.
Personally I think the best option for a smart watch hasn't been recognized yet. HTC's Blinkfeed screams smartwatch. Android Wear is partially going that way with a Google Now watch but the question becomes social media integration that blinkfeed has. Can they also have facebook, twitter, etc. integrated in.
If all the iWatch does is track health, it adds nothing to the game, it will sell because it's by Apple and iSheep buy anything and everything Apple. But it will be a horrific product and continue Apple's march to lesser relevance. It's not the way they'll gain ground on Android.