Watermelon bread is bread made with dough that's been colored and rolled in a way that, when baked and sliced, resemble pieces of watermelon. It doesn't taste like watermelon though, it only looks like it. There will be no seed spitting competition after you finish your toast.
The impetus, however, was apparently that kids might not have good appetites during the summer's hot weather. But if bread was watermelon-shaped, children would want to eat it.
Personally, I don't need bread to look like watermelons to eat it. I will eat bread whatever it looks like BECAUSE THAT IS HOW YOU MAKE SANDWICHES. You could make a loaf of bread that looks exactly like a piece of shit and I will still ask you where the cold-cuts, cheese and mayo are with zero hesitation.
Keep going for a bunch more shots and a tutorial in case you want to make your own.