"During aggressive testing over thousands of hours under severe conditions, it was revealed that this component failed to meet LG’s quality standards and could potentially impact our image quality over the life of the device."
Since the watch doesn't have a camera, the only "imaging" component is it's display: a 480×480 P-OLED round panel.
The first generation of the Watch Urbane was already prone to display defects appearing with aging. On the second gen, the higher density might make this occur more often.
It could also be adverse effects of rapid burn-in.
Those who received the few first units now know where to look – sort of.
LG says component affecting image quality behind smartwatch recall
A faulty component in LG’s Watch Urbane 2nd Edition, which had the potential to affect image quality, was behind the smartwatch’s removal from sale