The second algorithm took this data, and analyzing the pauses between smartwatch (left hand) keystrokes, it was able to detect how many letters were pressed with the right hand, based on the user's regular keystroke frequency.
Based on a simple dictionary lookup, the algorithm then managed to reliably reproduce what words were typed on the keyboard.
There's always going to be a tug-of-war between the personal benefits and the nefarious purposes of technology. With accurate geo-location, audio recording, calendar and email integration there were already known risks. I bet most people never anticipated key press recording was possible. It's a proof of concept that only diligence can prevent from matriculating to the open market. Jail break your Apple Watch at your own risk.
By way of one of the best security experts on the web, Bruce Schneier