The devices continue to work the exact same way… apple just does not choose to spend the money adding new features to it (or in more likelihood, testing that new features that require newer hardware do not screw the old device up). The watches still appear in the Watch app etc. If there is a bug to fix (like security), the device/versions will often end up getting out of band updates for even longer.

Do you remember when Garmin made phones? Maybe not, because it was only for a year. They released their flagship Nuvifone with much fanfare (to T-Mobile customers, anyway) in June of 2010. They announced that they were withdrawing from the phone market that October. To be fair, they did release one update after that.