The sports watch is having an identity crisis—and consumers love it. It used to be that sports watches were easy to define. They were water-resistant, shock-resistant, and sometimes used as stopwatches. Period. True, there were some specialized timepieces for pilots or divers, but no one wore them to work or a dinner party.

How timers have changed. Today’s sports watch can be a dressy accessory for men or women—useful at work or at home—or a rugged digital with cutting-edge technology. These sports watches are sturdy enough for a game of tennis but handsome enough to be worn to the office or on an evening out. Clearly, this category has been adapted to Americans’ casual lifestyle. The watches are informal and versatile, possessing what industry insiders call “crossover wearability.” Another factor fueling the category’s popularity is Americans’ fascination with technology. Sports watches are the original multifunctional timepieces, and their capabilities keep expanding as their technology becomes increasingly sophisticated.

Because of these factors, sales are steadily climbing. Depending on whose estimate you believe, sports watches account for a third to half of the $6.5 billion U.S. watch market.

Sports dress watches. This is one of the fast-growing segments of the sports watch category. Stylish and good-looking, dress sports watches tend to be thinner (though not thin), two-tone, with dark dials and steel bracelets or leather straps.

Many brands include not only a sports watch but also at least one line of dress sports timepieces more suitable for dining than diving. Esq. Watches, for example, is doing very well with what it calls its “sport luxury watches,” a “sporty but refined look suitable for the office and weekend.” Some are going further, stressing form over function and offering stylish new models such as Tag Heuer’s new Alter-Ego for women or Movado’s Nouvelle Sport, whose only “sports” feature is their minimal water resistance.

Meanwhile, more upscale and luxury watch brands have added sports timepieces to their repertoire. Examples include Bertolucci’s Vir Diving watch or Van Cleef & Arpels’ Roma Plongée, its first underwater watch. At the same time, the elegance and style of expensive sports timepieces have inspired emulation among designers of mid- and lower-priced brands.

The upscale “dress look” is now found at all levels, affecting sports watch sales in another way. Middle-class consumers want the look and value of expensive watches without having to pay the price, and mid-priced and mass-market brands are giving it to them. Esq.’s Sport Luxury Line is being touted as a $1,000 look for half the price. Meanwhile, Armitron is doing well with its low-priced “Dress Sport” line, featuring heavy bracelets, heavy metal cases, and oversized lugs. “This is a $45 watch that looks like it cost $200,” says a spokesman.

Chronographs. A decade ago, “chronos”—basically stopwatches—were an obscure niche in the market, known primarily to collectors and athletes. Today, the chrono is probably the best-known type of sports watch in America, both as a stand-alone watch and as a special function in other watches. It’s also the segment showing the most growth. That has one retail jeweler wondering, “How many long-distance runners can there be in this country?”

Americans are fascinated by the serious look of chronographs, implying vitality and authority. They also like the multiple functions, with three subdials measuring activities such as elapsed minutes and hours, running times, and laps.

The complex chrono look lends itself to a variety of innovative interpretations. This spring’s international watch show in Basel, Switzerland, for example, featured stylish “square” designs in a number of mid- and high-end chronos, such as Raymond Weil’s Giovanni. Also popular were the minimalist concepts—smaller, thinner, simplified chronos—of others such as Calvin Klein’s Icon Chrono.

Once found only among luxury brands, analog chronos are now so popular that many fashion and “bridge” watch brands offer the “chrono look” at popular prices without true chrono functions. That’s sparking more demand for high value at less cost. Pulsar’s Value Chronograph, for example, is a full-fledged analog chrono for just $99.

Chronographs traditionally have been men’s watches, but there’s a growing demand among women. New examples include Tag Heuer’s ladies’ Kirium chrono, Revue Thommen’s Airspeed model, and Alfex’s minimalist “designer chrono.” Also popular are lines sized for women and men, such as Hamilton’s chronos for four different-sized wrists or Movado’s Vizio Color chrono (with colored dials and matching leather straps). There are even chronos now for kids; one example is Timex’s new digital TMX line.

Specialized sports. What goes around comes around, and watches for specialized sports activities are popular again. Whatever your passion—hiking, biking, diving, flying, sailing, climbing, skiing, snowboarding, surfing—there’s a watch for it. They incorporate functions such as altimeters (for climbers), unidirectional turning bezels and depth sensors (divers), barometric pressure indicators (skiers and snowboarders), compasses (hikers), lap-recall memories (runners), and countdown timers (yachtsmen). Kreiger’s upscale chronometers and Nike’s new Typhoon even incorporate tide schedules.

High-tech pilot’s and diver’s watches are enjoying especially strong sales. Leading the way are veteran brands like Breitling and Omega. Fortis is also bringing its aviator watches to a wider market.

Ironically, while specialized sports watches are increasingly popular, those slated for professional sports teams have lost appeal in the past couple years. Professional baseball and basketball strikes have generated bad publicity and a backlash among fans, causing a slump in sales. Still, vendors expect a rebound in sales before too long.

Digital resurgence. Digital watches, the core of under-$65 sports watches, are fashionable again, especially with young people. That’s due in part to changes in design. Rather than small, “geeky” cases with hard-to-read displays, today’s digitals are larger with readily legible displays, oversized numerals, lots of special features, rugged cases, and sleek, futuristic designs. Popular examples include Casio’s G-Shock watches and Timex’s tough, chunky HumVee.

Also heating up sales again are “ana-digi” (analog-digital) sports watches—and their popularity isn’t limited to under-$50 lines. Citizen claims that its new Promaster Navitach ana-digi is the world’s most advanced racing chronograph. Hermes’ Espace digitally displays its functions (date, countdown, second item zone, chronograph, alarm) on an otherwise black dial when its crown is pressed.

Cool technology. Functional gadgetry is a big draw for watch buyers and a major reason that chronographs and other sport watches are such strong sellers. Watches are clearly “on the technology route,” says Susie Watson, a spokeswoman for Timex, the country’s largest watch producer. Timex’s function-filled Ironman is the best-selling sports watch in America. “You can do a lot more now with your watch, but we’re trying to make the watch more useful to the consumer, not see how much can we pack in there.”

Sport watches’ capacities keep expanding. Take lap-recall memory. It used to be that a good digital sports watch could store just a few laps. That capacity grew to eight, then 100. Now, Armitron’s new Zone watches come with a 300-lap memory.

Watchmakers are adding more non-sport functions, such as perpetual calendars, dual timers, pulse monitors, built-in pagers, vibrating alarms, and world timers (for tracking changing time zones around the globe). Some digital sports watches now can plug into personal computers and download data. Both Armitron and Timex have watches that start and stop functions with the flick of a wrist.

Advances aren’t limited to digitals. The titanium GST Deep One from the high-end brand IWC is the first diver’s watch with a mechanical depth gauge, maximum depth indicator, and dive timer.

Today there are more automatic quartz sports watches that generate energy for their batteries from wrist movements. There are also more battery-less sports watches. Citizen has had strong sales with its solar energy Eco-Drive watches, while Seiko’s Kinetic watch line has a strong seller in its new diver’s watch with a perpetual calendar programmed to 2100.

Special features. Today’s sports watches are tougher and can go deeper and endure more shock than those of the past. They are easier to work and have large, readily legible numerals, larger watch faces, touch-screen controls, and contoured cases and bands.

Stainless steel remains the dominant material of mid- and upscale sports watches, and increasingly of dress watches. The all-steel look is fashionable for the office as well as for casual occasions.

Other materials are coming into use. There is more use of titanium in upscale brands. Festina’s new Titanium Dress Sport line, for example, combines lightweight comfort with European design. Heavily padded leather straps are making a comeback this year at all price points. Expect to see more earth-toned straps as well as more burgundy, black, textured styles, and real as well as fake crocodile.

Other strap materials are finding their way into this year’s watches. More popularly priced sport models use straps of urethane and silicon. Hamilton’s rugged Khaki sports watches feature the tough, space-age material Dupont Delrin for center links on a stainless-steel bracelet.