A smartwatch uses a SIM, (usually embedded, sometimes will actually require a SIM card), and network connection to provide features similar to a smartphone, without actually having to be connected to any handset. The idea is to leave the phone behind and still stay connected! Smartwatch features typically include the ability to call/text contacts, check social media, stream music, get news updates, make mobile payments, track activity and utilize your favorite apps.
A Bluetooth device means you can’t completely leave your phone behind – you do still need to have your watch connected to your handset to utilize the watch features.