Hypothesis is a big word to run across on our beach hike! 

A hypothesis ("assumption" in ancient Greek), is a proposed explanation for a phenomenon.

In ordinary usage, a hypothesis is a provisional idea whose merit is to be evaluated. A hypothesis requires more work by the researcher in order to either confirm or disprove it. In the >>> hypothetico-deductive method that scientists generally follow, a hypothesis should be falsifiable, meaning that it is possible that it be shown to be false, usually by observation. If confirmed, the hypothesis is not necessarily proven, but remains provisional. 

For example, as you walk along a beach, you observe only white seagulls. You might form the hypothesis that all seagulls on this beach are white. This claim can be considered a hypothesis because it is falsifiable. It can be falsified by observing a single non-white seagull on the beach. Provided that the experimental uncertainties are small (for example that it is a seagull, instead of another bird) and that the experimenter has correctly interpreted the statement of the hypothesis (for example, that the meaning of "seagull" refers to only one species of bird), the hypothesis is falsified.

Now, back to our question about the origin of the watch we found...

The Random Hypothesis (H₁)

The watch was produced by the random actions of nature: wind, rain, flooding, sunshine, etc.

Although this hypothesis is a possible explanation, it is not very plausible!

The Design Hypothesis (H₂)

The watch was produced by a watchmaker.

In preferring the Design Hypothesis, we prefer the explanation that strains our credibility less. >>> The Surprise Principle