A mechanical watch is powered by gears and springs. It uses calibrated motion to regulate time. The basic principle behind a mechanical watch is as follows; the user turns the crown of the watch to wind a spring (called the mainspring), and this spring puts force on the first gear in a train of gears. Similar to a transmission, this gear train uses leverage to reduce the force significantly and apply a small amount of pressure to a mechanism called the escapement. This escapement does exactly what the name suggests; it allows the energy stored in the mainspring to escape very slowly, and it regulates the release of this energy in order to turn the hands of the watch at the correct speed to keep time.
If quartz watches perform similarly to mechanical watches, then why can mechanical watches be so much more expensive?
Mechanical watches were the only way to keep time without a clock nearby before quartz watches were invented. Mechanical watch mechanisms were some of the most advanced technology of their time, and mechanical pocket watches were in such high demand in the late 1800's and early 1900's that a massive industry emerged. As a result, many mechanical watches have held their value through pure historical and heritage related factors.
The major functional benefits of mechanical watches are that they never run out of battery and they are not disposable. Quality mechanical watches are made to last forever if taken care of.
There is an overwhelming variety of quality, decoration, and function that distinguishes some watches from other watches in addition to the heritage, tradition, and branding of companies responsible for building those watches. The level of precision, engineering, and detail that goes into fabricating some of the world's most complicated mechanical watches is difficult to comprehend.
The true value of a mechanical watch in the modern world, however, is the craftsmanship and the story. Humankind has been captivated by feats of elegance and precision for hundreds of years, and mechanical watches represent the epitome of beauty in function. The romance involved with quality mechanical watches continues to infect more people each year, even as the role that watches play in our lives evolves into something much more than keeping time.
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