Device: Samsung Galaxy Gear paired with Samsung Galaxy Note 3.
I am receiving notifications on the Gear from the Note, so I know it is connected.
I have turned Auto Lock on. When I did this, it asked me for a new unlock pattern and backup PIN, which I gave. Now, when I hold the Note 3, it has reverted to just "swipe to unlock". However, when put the watch down on the table and walk away (5 metres, ten meters), the Note 3 doesn't lock.
Below is a Screen shot from Note 3 showing: Gear Manager > Settings > Auto lock turned on.