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Y'shtola triggers.
Y'shtola's effect resolves.
As part of the resolution, Watcher leaves, then enters again.
Both Watcher abilities go on the stack, you decide the order.
a) The "leaves ability" returns the card that was previously exiled to your hand.
b) The Hideaway ability exiles a new card.
No matter the order of the abilities, the newly exiled card does not return to your hand and if nothing else happens, the end result is the same.
Thank you! I think I understand now :)
Watcher will be returned before it triggers, but it will still trigger and you will still get the card put into your hand.
Edit: Thought about this a minute (sorry for editing again). So it would be Y'shtola triggers, watcher goes to exile, then to the battlefield, and then back to the hand (I'm guessing during the end step)?
Watcher stays on the battlefield and the card exiled by its hideaway ability goes to your hand.