Google seems to be putting a lot of development and marketing into their Google Glass. It's hard to imagine that they would also be toying around with the idea of smart watches when their plans for Glass seem to cover everything a watch could do. The only thing I can think of is that if they plan on selling Glass at a high premium then the smart watch could be sold at a much lower cost to capture a separate market. Dev units for Google Glass sold for $1500 and it wouldn't be unreasonable for retail units to sell for $500+. A smart watch could easily capture the $100-500 market depending on features and integration with other Android devices.
hopefully one thing motorolla learned with the motoactive is at $300 you are not going to haev many buyers. on paper it was much better than a sony smartwatch.. but at $95 the smartwatch by sony won by virtue of not being as good the motoactiv was not 3x better