Goals from Chris Wood, Anthony Knockaert and Lloyd Dyer secured the win.
The Leicester manager said: "It [the win] was underpinned by the team's performance. I thought we were very good defensively as a team and as far as I'm concerned I thought it was a good all-round performance.
"We always looked dangerous, I thought we counter-attacked particularly well but I think this year our ball management was a lot better than last season.
We're doing okay at the moment and the players have continued to put an awful lot of commitment into the season so far."
The victory went some way to avenging Leicester's loss in the play-off semi-finals against the Hornets last season but Pearson was keen to focus on the current and not the past.
"There's always going to be added spice if you like to the build-up," he said.
"We've been aware of that externally but internally we've tried to keep the preparation as normal as possible. I suppose if you speak to the players, they will deal with it in different ways.
"The players who were here with us last year, that will be a very important win on lots of different levels. But we're a different side this year. We've got a better blend within the squad, we've brought some experienced players in who have added a different dimension to our team"
Having gone two goals down, Watford spurned some fine opportunities to get back into the game in the second period but it was what happened in the first half that particularly upset Watford boss Gianfranco Zola.
The Watford head coach said: "In the second half we should have scored a goal. If we had scored a goal maybe the story would have been different but the fact is we gave away 30 minutes of the first half, a crucial moment of the game and especially a team in form like Leicester, you cannot concede that.
"What disappointed me is how poor we were with the ball in the first 30 minutes. No imagination, no movement, no cohesion and that is what disappointed me very much. I saw a reaction, I saw a team creating chances but again, as I said, it's too late. Against a team like Leicester, you cannot afford that."
Asked what he put this down to, Zola responded: "I want to see it (the game) again. Certainly I would expect the standard of the performance to be higher. I need better performances from everyone. I cannot say it is this or that, many of them out there were under-performing especially, I repeat, with the ball. We work every day with the ball to make them better so I was expecting something different."