Why should you watch your wake while operating a boat near other boats or when entering a congested area?

You should watch your wake when operating a boat near other boats or when entering a congested area because the wake may cause personal injury or damage from your wake hitting the other vessels and throwing the people around or equipment. Also, It is common courtesy to stay far enough away from them.

It is also important to mind your wake as there may be swimmers nearby, or fisherman who would prefer calmer waters. Furthermore, aside from watching your wake near other boaters, you also need to watch your speed in low wake zones, as seawalls can be damaged by the continual waves pounding against them.

The "wake" is the wave left behind as your boat moves forward, its size depends on your speed.

In congested areas the wave of the wake causes other boats to move and can make people fall.

"Watch your wake" means "reduce your speed" so that you do not endanger people.