As usual all you need to do is update the app on your smartphone, run a sync with your smartwatch, and you're ready to go. It uses the mic on your timepiece to listen for songs but your phone does the heavy lifting.
That means your phone needs to be in range of your watch in order to identify songs, otherwise you're going to be left trying to name that tune using your old-fashioned memory.
Shazam a song from Android Wear and it gets added to your My Shazam list (as well as your My Shazam Tracks playlist if you've connected your Spotify or Rdio accounts to it).
Lyrics are available on your wrist too, should you want to sing along. You can't buy tunes direct from your smartwatch, though... yet.
Shazam joins the likes of Evernote, RunKeeper and Sonos in providing official Android Wear apps with dedicated functionality, although the smartwatches show basic notifications from all Android apps out of the box.