I'm not sure I've seen one like this before. I've seen watches with radios and such included in the past, but they were mainly toys.
This one seems to be based on sound technology, in a not unattractive package.
I'm not sure I'd ever want one, because I no longer use personal music devices, ever since one almost got me killed and I can't find any good use for a thumb drive, at least now that my occupational pursuits are decidedly low-tech.
Was the one you bought for your kids like this one and if so, as a WIS do you consider them to be serious instruments, at least from a geeks point of view?
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Well, here's a positive review of the one you mention and I would suppose that it uses the same Miyoto movement. The USB 1.1 seems to be it's main shortcoming.
http://the-gadgeteer.com/review/technotunes_256mb_mp3_player_watch_review
I think a watch is a good place for a USB drive, but it would have to be faster to used for serious business.
Maybe I'll track these things to follow advances in technology and a drop in prices.