According to the paper's sources, the device will—surprise!—run Android and be deeply integrated with Google Now. That's an obvious and useful route to take. Frequent users of Now will know that it's actually pretty impressive, pulling together rich seams of news, travel, weather and the like from your Google account—kinda perfect to have on your wrist.
Apparently Google has also been pouring a ton of research into reducing power consumption, too, so it won't require frequent charging. That's something that Samsung's Gear has come under massive fire for, so it'd be neat if Google manages to solve the problem.
Elsewhere, the paper says that the watch will "be able to communicate with other devices such as a smartphone." Which, on one level, durr, but reading between the lines, that likely means it will tether with your phone for data.