Changing sound/appearance of wearer; communications device.
The holo-watch is a device used by Megamind quite often, and it plays a huge role in the movie in terms of how the plot unfolds and the character relationships. It has the ability to holographically change the appearance of whoever wears it to that of someone that has been scanned into its database (Megamind quickly scans Bernard before using the watch to disguise himself). It can also alter the voice of said individual (presumably if their voice has been recorded). Later it is shown to be a communications device as well, when Megamind speaks pointedly into it telling Minion to "get the car" after being hugged by Roxanne.
The Warden wears the watch and is disguised as Megamind during Megamind's escape from prison. Megamind uses the watch to look like the Warden, Bernard, Metro Man, and Space Dad. Minion uses it to pretend to be Megamind at the end of the movie, as part of an orchestrated rescue of Roxanne by Megamind.
The first time Megamind uses the watch is to escape from prison by disguising himself as the Warden. The second time is to hide from and later deceive Roxanne. Third he pretends to be Space Dad so he can train Hal to be a superhero, and finally he pretends to be Metro Man himself. In a way the watch symbolizes his alignment/intentions; the progression of what the watch is used for changes from nefarious to heroic over the course of the movie.