I'm confused too with how the older S-Health app integrates with the newer Fitness With Gear app.
As near as I can tell, they are completely unaware of each other, despite sharing the same Samsung user account.
S-Health, being the older app, seems to only work with the phone's step counter and the original Galaxy Gear watch. Of those two things, there is language in the app detailing how it will use the greater step count of the two for logging after they sync.
The Fitness With Gear app seems specific to only the newer Gear 2, Gear 2 Neo, and Gear Fit watches.