Perhaps you've tried the Minuum keyboard on your phone or tablet. It's designed to take up as little space as possible on the screen with just a single line of keys, which is great for smaller screens. How small, though? The developers think smart watch size sounds good, so they are working on Minuum for Android Wear. There's a beta you can try to get into as well.
The video shows someone pecking at the compressed Minuum keyboard. While it looks a little weird, it does seem to work. Minuum uses very strong autocorrect and predictions to make a single line of keys work, but it's hard to get used to on a phone. On a smart watch the alternative is not typing at all, so Minuum has that going for it. Maybe it'll work and maybe it won't, but it was probably smart for Google to avoid the keyboard thing on a watch, just in case it's bad. That way if things don't work, it's just a bad app, not a bad smart watch platform.
It isn't clear how the keyboard will work yet – does Android Wear even allow touch text input in apps or will Minuum have to build its own keyboard-enabled shells? If you're intrigued and have an Android Wear watch, sign up for the beta and wait to be called upon.