Once Watch Original has been updated to watchOS 3 (post iPhone 6 update to iOS 10), what are the steps in transferring data (apps & Apple Pay) to a new iPhone 7 (after this new iPhone has been activated - old iPhone deactivated)?
First... Unpair the watch from the old phone... Next, back up the old phone to iCloud or iTunes... Next... Set up the new phone... Restore the backup from the old phone... Then pair the watch to the new phone... Then you should be right where you left off with everything right where it was before you started.
Simple enough, but it seems more logical to complete a Backup (of old iPhone) before unpairing the watch as this would save the pairing details in the Backup. ...Any sense to that in contrast to your instruction to complete the unpair first and then, do the iPhone Backup?
When you unpair your WATCH, a backup of it gets stored onto your iPhone. When you backup your iPhone via iTunes, the backup of your WATCH is backed up to iTunes along with your iPhone data.
9/16 - My iPhone 7 Black arrived today. ...Took the usual time to set-up; but once done, restored my Watch.
The steps for B/U of the Watch (as provided by kch50428 & Valana) b4 shuttering my iPhone 6, were helpful in keeping me focused as I was excited to get my new iPhone activated and my Watch restored properly.