According to Apple’s documentation, the watch should unlock the Mac after I wake it.
I just got a new iMac and have the latest Watch as well. On my older iMac half the time it would say “unlocking”, put up a spinning wheel, and then give up and ask for my password. On my new iMac sometimes it works as it should however other times it immediately puts up the password window and states that I must enter the password in order to unlock with my watch and other times my iMac gets unlocked by my watch without touching it (it will unlock if I’m in the adjacent room right behind my iMac, with nobody at the iMac at all.)
So does anyone actually use this feature and have it work correctly? Is it worth seeing the Genius to get correct operation.