Lithium batteries with you in the cabin have different rules than lithium batteries inside checked luggage.

Also cell phones don't need to be powered off while inside the cabin.

Air tags don't use lithium batteries. They use the big, flat, circular batteries that you have to replace.

Airtags use a CR2032 lithium battery: https://support.apple.com/en-us/HT211670

The FAA specifies both lithium ion and lithium metal batteries need to be in carry-on bags only, not checked: https://www.faa.gov/hazmat/packsafe/more_info/?hazmat=7

So they dont let you check watches?

It's about checked-in luggage, not what you take with you in the cabin.