Yes, "Watch" is the same thing as following. You'll see my future posts in your Watch feed.
Llama badges are just for fun. You can give them for free to others on DeviantArt, but only one per each person. The more you collect the llama badges, the 'higher' level you get (Super Llama, Ninja Llama... etc). You can also trade DeviantArt Points
for llamas. You can view the llama badges by clicking on the llama icon on the upper right corner of your page. You can give a llama badge by clicking the 'Give' button.
Here are the llama levels (one more new level is missing from the list) :