Vue.js - How to properly watch for nested data

You can use a deep watcher for that:

watch: {
  item: {
     handler(val){
       // do stuff
     },
     deep: true
  }
}

This will now detect any changes to the objects in the item array and additions to the array itself (when used with Vue.set). Here's a JSFiddle: http://jsfiddle.net/je2rw3rs/

EDIT

If you don't want to watch for every change on the top level object, and just want a less awkward syntax for watching nested objects directly, you can simply watch a computed instead:

var vm = new Vue({
  el: '#app',
  computed: {
    foo() {
      return this.item.foo;
    }
  },
  watch: {
    foo() {
      console.log('Foo Changed!');
    }
  },
  data: {
    item: {
      foo: 'foo'
    }
  }
})

Here's the JSFiddle: http://jsfiddle.net/oa07r5fw/

Another good approach and one that is a bit more elegant is as follows:

 watch:{
     'item.someOtherProp': function (newVal, oldVal){
         //to work with changes in someOtherProp
     },
     'item.prop': function(newVal, oldVal){
         //to work with changes in prop
     }
 }

(I learned this approach from @peerbolte in the comment here)