>>Does it have the rudimentary capability of understanding the spoken question or is the question inputted separately?<<
From what I understand, it understands the category as well as the question.
It is a quibble whether it reads the question or hears it from Trebek.
They said the question gets sent to Watson as a text file at the same time it is revealed to the human players and read.
Watson does not hear nor parse the question - nor the answers of the other players. That happened last night. Watson buzzed in second. The human player gave the wrong answer. That answer was also Watson's, and it merely repeated the same wrong answer not having any way of getting the information that xyz was wrong. A human would've thought "Hmm, better go with my second guess..."