The water cycle is an ongoing process that moves the water on Earth around as a gas, solid, and a liquid depending on the step in the water cycle that it is at. The water cycle has been around since water was first introduced to the Earth. The water cycle is made up of many steps including infiltration (water seeping into the ground), evaporation (water becoming a gas and floating up into the atmosphere), precipitation (water falling down to Earth from the atmosphere), and condensation (water changing from a gas to a liquid). The water that you drank yesterday could have been part of a glacier or underground stream millions of years ago.
Watersheds themselves would not be defined without the water cycle. A watershed is defined as the area where run off from precipitation goes, and its borders are where the run off goes in a different direction (usually a ridge or other high point).
The water cycle is important to the health of a watershed because it moves, introduces, and takes water away from the watershed. This aerates the water, takes away potentially polluted water, and adds potentially clean water to bodies of water within the watershed.
Also, the water cycle can hurt watersheds. It moves water that was precipitation to bodies of water, picking things up as it goes. This can add pesticides, oils, and other pollutants to the rivers, lakes, and streams - where many creatures live. Due to this, humans must be careful about how they deal with their products and waste if they want to keep aquatic life alive.