You install a free Smart Connect app on the phone to manage what gets sent to the watch, be it messages or call notifications. You give the watch functionality by adding watch apps to Smart Connect one by one. Smart Connect fetches the watch apps from Google's online Play store.
For example, I installed Sony's Messaging app to get texts on the watch. I get full texts and can reply with emoticons or pre-written responses such as "I'll get back to you." There's no keyboard on the watch to type individual replies, given that its screen measures just 1.6 inches diagonally.