With many cameras, it can be difficult to get a good clear picture of a watch. Many cameras will not focus close enough. If that problem is solved, then the flash is likely to be too bright, and if you turn the flash off indoors, colors are likely to be incorrect.

Budget macro:  

A jeweler's loupe or similar magnifying lens held in front of the camera lens will allow the camera to focus closer. On my camera a 2x or 3x works best for a whole watch, while a 10x is useful to highlight a watch part or a small area. I temporarily attach the loupe with Velcro, so I can change loupes or take standard pictures.

Flash:

The easiest way to get good pictures is outdoors with natural light. If that is not practical, you may be able to diffuse the flash enough to allow closeup pictures with flash. I use several layers of crumpled watch tissue (Watch tissue is similar to gift wrap tissue, except pre-cut in 3" squares) over the flash--Sometimes I tape them directly over the flash, other times I will sandwich the tissue between 2 small plastic condiment cups.

Other lighting:

Diffused lighting will typically mask scratches and similar flaws, while leaving markings clear. Many photographers use a light tent--Some sort of translucent material covering the watch, with a small opening for the camera. Lights will be outside the tent. This will produce extremely diffused light. To control reflections, you may want a ring of dark material around the watch, just outside the camera's field of view

Be careful of the colors around the watch--I've had problems with silvertone watches looking gold when I take pictures at my watch bench. I blamed it on my fluorescent lights, so replaced one with an incandescent. That helped a very little. I discovered that the main problem was the cork base and backdrop I had been using. Switching to green craft foam (what I had handy other than yellow) helped a lot.

Sometimes you want to enhance flaws--In these cases, you will want direct light--Experiment with different angles to get the result you want. I will use this for auction pictures, rather than describing the flaw's severity-I will find an angle that shows the flaw on the camera at approximately realistic levels and say "Watch has a blister on the dial, see pics" or something similar.

Resolution:  

For web pictures, 640x480 (or 480x640) is usually enough for most purposes with careful framing. If you want to show a particular detail, take a second close-up of just that detail, or crop a 640x480 rectangle.

Misc: 

If you take a batch of pictures by holding the camera sideways, and the camera doesn't auto-rotate, Windows XP can batch-rotate in Windows Explorer when in thumbnail mode. Hold the ctrl button while clicking on each picture that needs to be rotated in the same way (you can also draw boxes to select multiple pictures) then right-click and select one of the rotate options.