It's not so much that it stops working but that your watch case can no longer handle the pressure being exerted upon it. The gasket will fail or the crystal/case back will crush and water will flood your movement. read more
A watch stamped with "Water Resistant" means that it is humidity-protected. It can endure a bit of water splashes from washing your hands or being caught in the rain. However, water resistance does not mean you should swim or shower with your watch on. Water is the biggest enemy of a watch. If you go swimming or play sports, you should have your watch checked for an accurate reading of its water resistance levels every year. read more
Generally, these watches will have a water resistance of 30m/99ft maximum - which allows for contact with water but not immersion. Case-backs attached with screws would be the second level of water resistance. read more