While everyone is talking about TV sets, I think the future has nothing to do with those.
TV is an old technology, an old-fashioned way of consuming media. "Generation Mobile" doesn't watch its favourite video content on TV, it's using iPads and smartphones instead. Doesn't need cables for music television - it watches One Direction and Gangnam Style on YouTube. TV is not the future of Apple IMO, it's too predictable.
On the other hand, the technology we have right now - processors and pixels per inch, is developed more than enough. And I believe the challenge of the future is in the miniaturization of hardware, rather than big displays and multicore processors. And it always has been - Apple is one of the few companies which still believes in the thinner and lighter form factor. When technology allows it, Apple releases impossibly thin, fine crafted devices such as the latest iPod touch, iPod nano and iPad mini.
That's why I think an iWatch will be an interesting thing to do. Not as a handsfree kit or accessory for your iPhone, but as a stand-alone device. A device you can use to Facetime your friends, check the weather, your location, routes, your body temperature and pulse all the time. A smartwatch with technologies such as an accelerometer and Siri. I even think the multitouch doesn't have to be heavily used if the device has OS and interface predicting your activity, bringing out the right information at the right time (Google Nowish).
iWatch can be a stripped-down phone concentrated on thew new services people actually use, such as voice & video calling through the web, iMessage, Twitter, Foursquare...
There could be social and cultural drawbacks, initially - people are not used to talking to their watch... Well, they were not used to do all those things beside talking on their phones back in the day either. Now, wherever you are, there are always many people with phones out staring at their screens for minutes. Why not just a quick peek at their watch for the latest info - I actually think this can be less time consuming and even more social.
Think of a smart hardware you can never drop or loose. It's always with you.
People say Apple changed the phone forever, but Steve Jobs and co. actually created a totally new type of device in a familiar form factor.