Generally, watches can be categorised as (IMHO) :
1) Dress watch - or fashion watch (whether mechanical or quartz) often appreciated as jewelry or as collectible works of art rather than just as timepieces to tell the time. The price ranges from very cheap but accurate watches (intended for no other purpose than telling the correct time) to extremely expensive watches that serve mainly as personal"jewelry". Traditionally, men's dress watches are for semi-formal, and formal (business) situation. Nowadays, many women's dress watches have faceted gemstones on the face, bezel, or bracelet. In the 1980s, the Swiss Swatch company hired graphic designers to redesign a new annual collection of non-repairable watches. Companies that produce watches specialize in one or some of these fashion markets that I know of (may be more)are Patek Philippe, Blancpain and Jaeger-LeCoultre who specialize in simple and complicated mechanical dress watches. Of course other brands like Rolex, Panerai Seiko etc do produce these too but they specialised in other category of watches.
2) Sports Watch - for those actively on the go in sporting activities, there are watches for such ocassion. Companies such as Omega SA, Ball Watch Company, TAG Heuer, Sinn, Breitling, Panerai and Rolex specialize in rugged, reliable mechanical watches for sport and aviation use. Under "sports" maybe some watches can be sub-categorised as divers, chronograph (which has a stopwatch function), a chronometer watch (which has a high quality mechanical or a thermo-compensated quartz movement that has been tested and certified to operate within a certain standard of accuracy by the COSC (Contrôle Officiel Suisse des Chronomètres)). The concepts are different but not mutually exclusive; so a watch can be a chronograph, a chronometer, both, or neither.
For diver watches, it must be made to withstand the water pressure. The standards for diving watches are regulated by the ISO 6425 international standard. The watches are tested in static or still water under 125% of the rated (water)pressure.
3) Extreme Environment watch - like in space, polar icecap, mountaineous places like Mt Everest will requires tough, rugged and the use of specially tested watches. On April 12, 1961, Yuri Gagarin wore a Shturmanskie (Russian word which actually means "navigator's") wristwatch during his historic first flight into space. This watch used the movement manufactured by the First Moscow Factory, especially the trademark "POLJOT", which means "flight" in Russian and is a tribute to the many space trips its watches have accomplished. Another example is the Sinn watches worn by a Canadian who resides near the Artic Pole for up to 8 or 9 months in a year.
4) Multifunction watch - watches with other function, for example calculator, address book, heart beat/pulse monitor etc. Companies such as Casio, Citizen, Timex, and Seiko specialize in watches as affordable timepieces or multifunctional computers.
5) Tourbillion watch - is a watch with an addition to the mechanics of a watch escapement. Developed around 1795 by the French - Swiss watchmaker Abraham-Louis Breguet and throughout the century has evolved into a fine piece of horological advancement. Originally an attempt to improve accuracy, tourbillons are still included in some expensive modern watches as a novelty and demonstration of watchmaking virtuosity. The mechanism is usually exposed on the watch's face to show it off. There are generally 4 different types of tourbillion watches (could be more, but from my reading there are 4) - i) double axis, ii) double and quadruple tourbillons iii) Triple-axis tourbillon and iv) Flying tourbillion (using cantilever)
Last I heard, several Chinese manufacturers now produce a variety of tourbillon movements (bought in as by some foreign manufacturers and incorporated into watches that meet the requirements of the Federation of the Swiss Watch Industry to be sold as Swiss watches. The availability of cheap tourbillons has led industry spectators to worry that another Quartz crisis may occur, where the Swiss watch industry will not be able to adapt quickly to cheaper complicated mechanical watches produced in other countries like China, India etc.
Note : References :
1) Wikipedia
2) Sinn - 50th Year Anniversay Book.
3) "Current Chinese Developments".
http://www.tractionink.com/. Retrieved June 2010.
4) Federation of the Swiss Watch Industry. "Swiss Made".
http://www.fhs.ch/en/swissm.php. Retrieved June 2010
(Edit : Russian text cannot be read, hence the edit)