With my first rep I've just been telling people that it's a rep. After all, I got it because I like the looks of it, not because I want people to think I've spent (or can afford to spend) a small fortune on a watch.
It's fun to let them admire the watch for 15 seconds or so before confessing, though. As others have said, the reaction you get is priceless. People seem genuinely impressed that a replica can look so good - and that you've managed to acquire said replica. In fact, they're probably more impressed than they would be if you were simply wearing an expensive watch that you'd just walked into a jewellers and bought!
Here's another question, though. What about if you're not being called out, but your watch just catches someone's eye and they say, "Ooh. That's a nice watch. What is it?"
Do you say, "It's an XYZ," or do you say, "It's an XYZ replica"?