A Smarter Planet had a great blog entry on why Watson got the answer wrong.
Also, Bruce Upbin wrote specifically about Watson performing a spatial operation:
There are many reasons Watson is good
at Jeopardy!. It has something like a
million pages of documents and a
geospatial database in its memory. It
can run the board on categories like
“Northernmost Capital Cities,” in
which you’re given a trio of capital
cities and have to name the
northernmost one. Watson doesn’t
really “get” that the category is
looking for geographical information
off the bat. That isn’t a simple
assumption to deduce from the category
syntax, but it catches on quickly that
all it has to do is compare the
latitude of each city in the trio and
give the one with the highest number.
It buzzes in correctly on Stockholm,
Bogota, Pyongyang, Algiers and
Kathmandu. A.J. and I knew some of
these, but that’s when Watson’s other
superior trait kicks in; the machine
is lightning-fast at buzzing in
answers.