iPhone connectivity

The watch will definitely connect to your iPhone 7. It will show every single notification you get on your iPhone, but apart from reading them you can only dismiss them, which will do the same on your iPhone. You cannot however act on those notifications from your watch like Quick Reply to a text message or similar. You can also accept and dismiss phone calls, but you will still have to use your phone to talk.

The watches (Fenix 5/5x/5s) all show notifications in the following ways...

1) Pop-ups
When you get a notification on your iPhone the watch screen is taken over by a notification for a few seconds (or while the event is happening) - some of these can be acted on, for example on an incoming call you can choose to answer or decline

2) Watch face
You can add a notifications icon to the watch face (on the default Fenix 5 faces) - that shows the number of notifications you've got. Depending on where you put this on the watch face it might also tell you what type of notification you have (put it on the left and it will show a notification icon with "1", put it on the middle bottom and it will show the notification icon with "Snapchat" for example)

You can also put a calendar notification on your watch face that shows the time of your next calendar appointment

3) Notifications widget
Go to this widget by pressing up or down and it will show all the notifications you have received.

That's it, it works really well in my opinion. If you get a text message notification or something like that and "clear" it on the watch it is immediately cleared off the iPhone screen but it leaves the notification number on the icon on the iPhone app.

Hope that helps