How to play music on iPhone via Apple Watch on watchOS 4?

I believe you are referring to the Music complication. Which is separated from the Now Playing in watchOS 4.

The solution is to use a dedicated Now Playing from now on. It can be also set as a complication which would allow easy access:

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Correct, with watchOS 3.x it was possible to use Apple Watch as a kind of remote for iPhone's Music.app:

  • Browse all available music by artist/album/genre
  • Start/stop playback on your iPhone with Apple Watch
  • Change the music source from iPhone's storage to Apple Watch's storage

Answer

Unfortunately, starting with watchOS 4, you can't browse music on your iPhone to start playing it using your Apple Watch.

See also Apple's Apple Watch User Guide on Music/Now Playing for using Music.app with watchOS 4.

watchOS 4 Now Playing screen


Workaround

You may want to use this workaround:

While watchOS 4 will no longer allow a user to browse their iPhone's music library, they can still use the Apple Watch to control it. In fact, it's now easier than ever: A "Now Playing" screen shows up by default when the user is playing music from their iPhone, giving quick access to pause, skip a track, or adjust the volume with the Digital Crown.

However, in order to take advantage of this, users must start the playback of music on their iPhone, then continue controlling it via the Apple Watch.