What is the range of the Unlock With Watch feature for iOS? How close does my Watch need to be to my iPhone in order for it to be able to unlock the phone? Conversely, at what distance will the Watch fail to unlock the phone?
I'm not sure exactly what the distance is, but this Verge article suggests 3 feet:

...your phone isn’t looking for your face with a mask, it’s looking for a face with a mask. With this feature on, when my wife was wearing a mask, she was able to unlock my phone with no problem if I was within three or so feet.

If you're concerned that somebody may unlock your phone without your permission - the same article addresses this:

...whenever your Apple Watch is used to unlock your phone, the watch buzzes you, along with a notification saying your phone has been unlocked and a button to lock it. Pressing that lock button immediately locks your phone and requires a passcode on next unlock.