Hierarchy is being the Bluetooth connection between your iPhone and the Apple Watch has the highest priority, followed by the Wi-Fi connection and lastly via mobile data connection.
So if you are away from your iPhone and with Wi-Fi turned on, it will search and connect to Wi-Fi networks that you once connected before on your iPhone, as it will take up less battery than using mobile data. Example: when you are at home, far from your iPhone Bluetooth connection but still within the home’s Wi-Fi coverage. It will connect to your home’s Wi-Fi.
The mobile data function, if it is unable to get connection to your iPhone and not in any known Wi-Fi areas, it will be switched to that.
All of these functions and hierarchy, are all part of saving and improve the battery life.