Quad core + 512MB of RAM. Now it just needs HDMI out and we've got a quite capable portable computer on our wrists.
Still, the battery isn't something like the battery in a traditional watch so at some point I won't just be able to order a button cell on Amazon and swap it out like I could on any old Timex, etc. Definitely hurts the lifespan and it's a major reason I only bought this watch because I got it on sale for $100. I wouldn't feel as comfortable buying a $500 watch that would be forever battery-dead in 3-4 years.