I'm not positive, but I believe the Gear 2 doses your bloodstream with high levels of radiation. The radiation then travels up your wrist to your heart. Using high power, Ultra Low Frequency(ULF) radio waves, the Gear 2 bombards your body looking for the radiation that it introduced. By measuring the output rhythm of the radiation (that the Gear 2 introduced), the watch uses a complex algorithm (the computation power alone produces more radiation) to figure out your heart rate.
Or something similar to this:
“Seeing” the heart signals
To detect the heart-related signals, two tiny green LEDs embedded in the back of the sensing unit shine through the skin onto the blood vessels just below the surface. At the same time, a small light sensor registers exactly how much light from the LEDs is reflected by the blood vessels. The darker the veins, the less light is reflected. The veins darken briefly with each surge of blood caused by the heartbeat. The sensor continuously measures exactly how much light it receives, and all variations are amplified, digitized and processed to produce a clear heart-signal reading.
--http://www.research.philips.com/downloads/backgrounders/backgrounder-unobtrusive-heart-rate-monitoring.html