Restoring your Apple Watch to its factory settings is easy. On your Apple Watch navigate to Settings General > Reset, then tap Erase All Content and Settings.
You can also set your Apple watch to erase all content when someone incorrectly enters the passcode 10 times. To enable this feature, open the Apple Watch app on you iPhone and navigate to My Watch > Passcode and tap Erase Data.
To restore your Apple Watch from its last backup just pair it with your iPhone.