1. A fruit.
2. An alternative term to express that something is cool. It was primarily used in the video "Kardashians at a Drive Thru" by SimgmProductions. The word is still used in other Kardashian spoofs and there is a number of people saying it under Simgm's comment section.
The negation of "watermelon" would either be "not watermelon" or "sour watermelon".
"This video was so watermelon!"
"The salad at the restaurant is so watermelon."
"That's totally not watermelon!"