The reason these are sold and used, is to keep an automatic watch fully wound when it is not being worn. A lot of mechanical watch aficionados have more than one auto, whether vintage or modern, and it is just more convenient to put the watch on without having to start it up, set the date and time, etc. Especially on vintage watches that do not have quick set date functions.
However, there has been increasing evidence to support the theory that watch winders can harm your watch.
There is even a warning inside the instruction pamphlet to this effect. If you set the winder at too great a rate, the watch will be wound to full, and then the slipping bridle of the automatic mainspring will slip.
If this continues hour after hour, it causes excessive wear to the mainspring and the barrel walls. This may not be an issue immediately for a new watch, but for a vintage timepiece that already has many miles on it, it can cause hiccups. And almost right away at that.
It is critical to set the winder according to the needs of the watch.
If your watch is a type that winds in both directions, you need to set the winder accordingly. In general, these watches are more efficient in the winding department, so they don't need as many rpm. Ideally, you want the winder to fluctuate direction in this case. The Winder Manual should have guidelines to help you.
In the case of a unidirectional winding watch, like the ETA 7750, only one direction is needed on the winder, but needless to say, you need to know which direction that is. The 7750 winds clockwise when viewed from the back, so that means counterclockwise when viewed from the front.
Micro rotor watches are often less efficient in the winding department, depending on the make and model. This must also be taken into consideration when setting your winder.
This is the only time that the term 'overwinding' has any meaning. There is no such thing as being 'overwound', but to subject an automatic winding system to excessive or constant motion will slip the mainspring constantly, causing wear. When the mainspring or barrel gets worn in an automatic, it results in 'Mainspring Creep' and will shorten power reserve and the watch may even fail to wind and maintain power properly. In a manual wind watch, you can tell when the watch is wound because the crown won't turn anymore.
This brings me back to something I say often to my vintage watch customers.
Vintage watches are elderly, and deserve some extra respect and careful handling. Watch winders can and will mess them up.
I consulted with a wide range of watchmakers in many areas of the Industry on this subject, and more and more this is being seen as a definite issue, especially for older watches.