... somebody using all their senses and augmented (when judged appropriate by the skipper) with checking charts and instruments. If they're at an inside station, they're looking out.
If you go to the head take a nap (or whatever) you're not on watch. One could argue that a scheduled lookout at specific intervals is "keeping watch", and that may be. But I'd argue that what is appropriate offshore in settled weather might not be adequate under certain circumstances (e.g. "squally weather", fog, high traffic coastal areas, in a fast boat, high winds, etc.). Sometimes a near-continuous watch is needed.