EBay 'cancels' items for reason.
One is that the item has been deemed counterfeit and eBay tries to prevent sale of such items.
Another is that the seller has had his membership revoked.
This could be for fraudulent activity or just that he has not been paying his eBay fees.
However, since you have been able to contact the seller through eBay and you don't mention his account being closed completely, at a guess the first reason (counterfeit) is the most likely.
, but tells me that ebay is holding the payment, so she wont ship it,
More important is that the seller is trying to keep your money without shipping. If the seller is new, working in a high fraud category (like watches) or has a record of violations, eBay and Paypal will put a 21 day hold on her PP account to encourage better customer service. She can print a shipping label while the Hold is in place.
So either she is lying or does not understand the process.
Tell her she can print a PP shipping label. Ask her to send you the Delivery Confirmation number.
If she continues to stone wall, open an Item Not Received Dispute (Customer Support tab up in the top right hand corner there).
Be aware that if you continue with the transaction, you are likely going to get fake watches.
Ah! Curse your sudden but inevitable betrayal!-- Hoban Washburne.