How do I turn off Activation Lock on Apple Watch?
It seems that simply unpairing it turns off Activation Lock.

Before you send your Apple Watch in for service, sell it, or give it away, you should turn off Activation Lock on your Apple Watch. Just unpair your Apple Watch from your iPhone:


  
  Keep your Apple Watch and iPhone close together. 
  Open the Watch app on your iPhone and tap the My Watch tab.
  Tap Apple Watch, then tap Unpair Apple Watch. 
  Enter your Apple ID password. If you forgot your Apple ID password, you can reset it. 
  Tap again to confirm. 
  
  
  If you can't access your iPhone or Apple Watch, or if your Apple Watch
  isn't paired with your iPhone and you need to turn off Activation
  Lock:
  
  
  On a computer, go to iCloud.com. 
  Sign in with your Apple ID, and open Settings. 
  Under My Devices, click your Apple Watch.
  Click X next to your device.
  Click Remove to confirm.
  



https://support.apple.com/en-us/HT205009