They didn't get into the nitty gritty, but from what I heard here is my guesses.
Like the iPhone AirDrop feature, the Watch is going to have both wi-fi and Bluetooth, and will use a combination of them to communicate with the iPhone efficiently. Bluetooth will be used in it's low power mode to keep in touch with the iPhone, and send small amounts of not-time-sensitive data to/from the iPhone.
When speed or larger amounts of data need to be transferred, Bluetooth will be used to initiate a peer-to-peer wi-fi connection between the iPhone and Watch. You can probably expect this to happen during navigation (so the Watch can use the iPhone's GPS) and for Siri interaction; among other things.
The Watch itself will not communicate directly with wi-fi hotspots or cellular data.
This is why they said it 'required' an iPhone 5 or later to work. That is the first phone to have the full AirDrop bluetooth/wi-fi hardware requirements. Older phones can only 'partially' implement the peer-to-peer features of AirDrop.
Anyway, that's my guess.