I have a plain HRM (Polar) you put in age, weight, fitness category, max HR, rest HR.
and it tells you how many calories you have burned.
I always took the absolute values with a pinch of salt but did think the relative values might be useful.

On Sunday I was out for 7.5 hours in the Cairngorms (glorious!) and found myself wondering how many calories the HRM would tell me I had burned (therefore how big a feast was I due)
The I tolfd myself - nah its rubbish anyway
then I decided to have a think about it and came up with this.

burning calories, burns oxygen at specific rates (more oxygen required to burn fat than carbo).
so you can take the number of calories burned as directly related to the amount of oxygen aborbed,
amount of oxygen absorbed is represented by the amount of blood transported,
amount of blood transported is represented by the activity of the heart.

I did a rough calculation in my head.
Assume I normally burn 3000 kcal a day
I'm out for 8 hours = 1/3 of a day
So normally I would have used 1000kcal
but I'm running (and walking) for these 8 hours and my average heart rate is increased I guessed at this being double my daily average (HRM measured at 129 so I reckon that was a pretty good guess)
That means twice the amount of oxygen transported, therefore 2000kcal
But its not only your HR that incresaes, but also stroke volume increases( amount of blood pumped per beat of the heart).
off the top of my head I went for 2.5 times incresa in stroke volume.
giving a total of 5000kcal for the run.

Once I finished I checked the watch - 4912kcal !

so either I'm a genius, it was a lucky guess, or its not all that tricky - I'm going for the last of these.

My HRM doesn't pretend to work out how much fitter you are, it simply asks you what your level is.
Sounds like your watch is being clever and atributing a significant increase in running economy and efficiency -- perhaps too much.