According to my watch that claims to measure altitude, as far as I can see it says that in Stockholm Sweden the altitude is 170 meters but can that be right? How exactly can we know that 0 altitude in Bangladeh is the same as 0 altitude in Stockholm?
Altimeters use barometric pressure to measure altitude or elevation. Your watch likely uses a Baro-Altimeter. The problem with that is that the barometric pressure also changes with the weather. As the barometric pressure goes down your altimeter watch will think you are going up in altitude even though you are solidly on the ground.
For such watch altimeters to work you need to calibrate the watch's altimeter on a daily basis (or whenever you want it to be accurate). This is done by knowing the elevation where you are at (usually in the morning) and setting the watch altimeter to that known altitude/elevation. Then, as you travel around during that day your watch altimeter will remain somewhat close to correct as it senses the changes in pressure due to you changing altitude or elevation (the ambient or "weather" barometric pressure will also change a bit throughout the day causing the watch altimeter to drift out of calibration during the day).
How do you know what your elevation is? You may need to reference a publication or map. If you are at home you can find out what the elevation of your home is through various means and calibrate using that. Some people even calculate the altitude of their night stand above the street level to get very accurate. This is a hassle but that is the reality of using a barometric altimeter.
You could also use a known barometric pressure setting for your part of town at the present time and set that in the watch altimeter as well if you can't figure out your exact elevation for a starting point.
This is what we have to do as pilots. We either obtain the current barometric pressure and set the altimeter accordingly or at smaller airports we set the altimeter to the known elevation of the airfield we are at.
Pilots also have to continue to reset their altimeters during a flight as the barometric pressure changes through out the trip as you fly from one pressure gradient to another or as the local weather and pressures change.
Nevertheless, there will always be some calibration error and inherent inaccuracies in measuring the altitude with your watch's barometric altimeter. Aircraft altimeters are not to be trusted beyond +-50 ft (or +-100 ft if you really want to be safe).
(former military and corporate jet pilot - ATP Airline Transport Pilot rating)
0 altitude in Bangladesh is likely not exactly the same then 0 altitude in Sweden even when you define both being equivalent to the sea level. This is because sea level is not the same every where. It is rather complex. As explanation I show what wikipedia says about Vertical datum:
A vertical datum is used for measuring the elevations of points on the sea level. Vertical datums are either: tidal, based on sea levels; gravimetric, based on a geoid; or geodetic, based on the same ellipsoid models of the earth used for computing horizontal datums.
In common usage, elevations are often cited in height above sea level, although what “sea level” actually means is a more complex issue than might at first be thought: the height of the sea surface at any one place and time is a result of numerous effects, including waves, wind and currents, atmospheric pressure, tides, topography, and even differences in the strength of gravity due to the presence of mountains etc.
For the purpose of measuring the height of objects on land, the usual datum used is mean sea level (MSL). This is a tidal datum which is described as the arithmetic mean of the hourly water elevation taken over a specific 19 years cycle. This definition averages out tidal highs and lows (caused by the gravitational effects of the sun and the moon) and short term variations. It will not remove the effects of local gravity strength, and so the height of MSL, relative to a geodetic datum, will vary around the world, and even around one country.
Following image shows different vertical datums in Europe. (Source: Vertical references in Europe by Hans Erren)
The difference in the definition of the sea level can be remarkable. In the construction of a bridge over the Rhine river in 2003 that connects Switzerland with Germany this was considered wrongly and since the vertical datums of both countries (Amsterdam vs. Marseilles) differ by 27cm the bearings of the bridge on one side had to be corrected before the construction could be completed.
See, the elevation (altitude) is the distance between the surface of the datum and the certain point. The datum - is the mathematical model of the Earth shape. You can assume its shape as if the still sea that was extended under continents. So given the same datum the same values of elevation will be equal to each other no matter where they were measured exactly. But there are more then one datum so the same elevation values that were measured using different datums won't be equal.
If you seek for more in-detail information start from "Vertical datum" section at the link provided above.
Zero Altitude is not a fixed number every where on earth at the exact same time. As others have pointed out it is based upon a datum of sea level at a standard atmosphere. A standard atmosphere is a unit of pressure equal to 760 mmHg at 15 degrees C. Additionally, the datum is the mean or average of the oceans surface around the globe based upon the twice daily tidal changes. So when you are at sea-level and the atmospheric pressure is not 760 mmHg, the temperature is not 15 degrees C and its low or high tide - an uncorrected altimeter is not going to read zero (0).
Your watch may adjust for temperature and local barometric pressure changes. It is highly unlikely it adjusts for daily ocean tidal fluctuations, daily large scale atmospheric pressure variations related to tides, humidity levels, variations in the theoretical temperature lapse rate of the atmosphere, global pressure variations, etc. I have personally seen aircraft altimeters at sea level vary +/-30m when not constantly adjusted for local barometric pressure. I believe there are historical records of sea level altitude variations into the 100's of meters.
Another note, Altitude and Elevation use to be more synonymous terms when elevation was exclusively based upon sea-level and the use of altimeters. As we have moved away from this datum and began to utilize GPS and mathematical geodetic datum's the variance proved to be substantial. For an extreme example, if you were setting stationary on top of Mount Everest with your watch (may be a little out of its range) and an accurate GPS, you would see your watch reporting varying altitudes throughout the day. However, the GPS would be reporting a much more stable elevation of 8850m or within its accuracy. Even with a GPS we have seen changes as a result of improvements in the geodetic datum's. The difference between the NAD27 and NAD83 datum were in the range of 10's of meters. However the differences between the newer variations of the NAD83 datum; NAD83(1986), NAD83(1997), NAD83(2007) and NAD83(2011) have progressive gotten smaller. The most recent version varies on the range of cm's to its predecessor.