Notifications While Not Wearing

but why?? Why would you want the watch to display (or more to the point, vibrate as it does) when you're not wearing it??

If you had an alarm set and had just placed the watch, say on a table next to a computer you might be using, you would still want the alarm vibration to occur.  If the watch is far enough away from your phone that the bluetooth connection has dropped, you won't be getting watch notifications anyway.