What is a mechanical watch? It is any watch powered by a mainspring rather than a battery. A manual watch is wound by hand through the crown. An automatic (self-winding) watch has a swinging rotor that winds the spring as the wearer moves. The timekeeping mechanism is the same in both.
1. Power: the mainspring. A long, coiled steel or alloy spring sits inside a toothed drum called the barrel. Winding tightens the spring, and as it slowly unwinds it turns the barrel.
2. Transmission: the gear train. The barrel drives a series of wheels (centre, third, fourth and escape wheels). Their ratios are chosen so that the centre wheel turns once an hour, which carries the minute hand. A small set of gears under the dial, the motion works, reduces this by twelve for the hour hand.
3. Regulation: the escapement. Left alone, the train would spin freely and the spring would run down in seconds. The escapement stops that. In the lever escapement used in almost all modern watches, a pallet fork locks the escape wheel, then releases it one tooth at a time. Each release gives a small push back to the balance. This is the 'tick'.
4. Timekeeping: the balance and hairspring. The balance wheel swings back and forth, returned by a very fine hairspring. It swings at a steady rate, often 5 to 8 beats per second in modern watches, and this rate decides how fast the escapement releases the train. Adjusting the effective length of the hairspring makes the watch run faster or slower.
Jewels are synthetic rubies used as low-friction bearings at the points of highest wear. More jewels do not by themselves mean a better watch. See 'What Jewel Counts Really Tell You'.
Why mechanical watches need servicing: all these parts depend on tiny amounts of oil. Over years the oil thickens and dries, friction rises and parts wear. A service every several years, as the maker or a watchmaker recommends, cleans and re-oils the movement before damage occurs.
The anatomy explorer and escapement animation on this site show each part moving.