I always assumed it was a pocket watch, um, pocket.
I don't use a watch, but I am a smoker, and so, this pocket has plenty of use for me.
I can carry a lighter or matches in there. I also use it to dispose of extinguished butts, until I can find a garbage can. I've never been one to toss a butt onto the ground. Rather, I squeeze the "heater off onto the grass, stamp it out, and then the resulting paper/filter gets rolled up and stored in that little pocket until I can find a garbage can.
When I'm working outside on a small project, that doesn't require my overalls, it's a great pocket to store loose nuts and bolts, screws, other fasteners, or snips of wire that should find the way to the garbage rather than just being tossed on the ground.
I despise littering and those who do it, so I guess for me, it's a great temp garbage keeper.
A lot of jeans makers do make that pocket too small for anything. Mark's Work Wearhouse jeans give a very generous sized watch pocket, so there is no leap to imagine a pocket watch going in there. Keep in mind too that this wouldn't be yer fancy pocket watch for a fancy man. *Real* men had their watch on a chain, and it was always tucked into their *vest* pocket. Vests being for a gentleman, and jeans with a watch pocket being for the blue collar scum like me. And possibly you