Notifications will be routed to different devices under different scenarios.
The philosophy is to send notifications to the device that you're using, so you can see them as soon as possible.
If your iPhone is unlocked, you'll get notifications on your iPhone, instead of your Apple Watch.
If your iPhone is locked or asleep, and your Apple Watch is unlocked and on your wrist, you'll get notifications on your Apple Watch.
When you dismiss notifications on your Apple Watch, they're also dismissed from your iPhone. You might get certain notifications on your watch that you'll need to respond to using your iPhone.
When your Apple Watch is locked with a passcode, and when your Apple Watch is locked, all of your notifications will go to your iPhone. An Apple Watch with a passcode will lock automatically when you aren't wearing it, when it loses contact with your skin, or while it's charging.
I prefer to enable watch with passcode. So, that when my watch is on my wrist and unlocked, all notifications would go to the watch. And if I take off my watch, the watch will be automatically locked and all notifications would go back to my iPhone.
I wanted to post the link to the original explanatory document in apple website ( HT204791 ) but I cannot do so until I reach a post count of 10.