Round Android Wear Emulator is Square

You don't have to use the command line to create the AVD. You should just make sure you turn off "USE HOST GPU" as this feature currently doesn't support the round watch face.

Make sure when you create you AVD that you select the following options for a round emulator:

Device: Android Wear Round (320 x 320: hdpi)Target: Android 4.4W - API Level 20CPU/ABI: Android Wear ARM (armeabi-v7a)Skin: AndroidWearRound

Alternatively, you can create round or square emulators with the command lines:

android create avd --force -n WatchRound --target "android-20" --device "Android Wear Round" --skin AndroidWearRound --abi android-wear/armeabi-v7aandroid create avd --force -n WatchSquare --target "android-20" --device "Android Wear Square" --skin AndroidWearSquare --abi android-wear/armeabi-v7a

It is important that Device and Skin are both consistent, and you cannot mix round and square with the same emulator. If the problem still happens, post a screen shot of your configuration.

I'd second Wayne's suggestion to use the command line to create the AVDs. If you just disable "Use Host GPU" from the UI, you get the round skin, but the wearable layouts are all still made for square displays, so the content is cut off in the corners. Also, using

android create avd --force -n WatchRound --target "android-20" --device "Android Wear Round" --skin AndroidWearRound --abi android-wear/x86

to create an x86 based emulator runs quite a bit faster on PCs in my experience.