Fitness watches take into account your height, weight, age, and gender and use this information with step count, heart rate and potentially perspiration to estimate the calories burned during activity.
As with other metrics, calories burned is an estimated metric on fitness watches. They aren’t 100% accurate, just as your calorie count is not 100% accurate in telling you exactly how many calories are in the brownie. But both bits of information certainly helps in maintaining a healthy balance between caloric intake and calorie usage.