I am unable to install a watchOS 2 WatchKit app due to an application-identifier entitlement. This happened after turning on App Groups in the Capabilities tab.
Full
My problem was the App ID in combination with the certificate used to create the provisioning profiles. None of my provisioning profiles were working because none of them were "Elgible" (created with a certificate that matched the App ID). I had moved development to a new machine, so perhaps this was the deeper reason. At any rate I had to create a new certificate, then new provisioning profiles with that certificate being careful to choose the right App ID when creating them. Good luck.