The Milgauss was designed to be used by scientists and those working in areas where exposure to high magnetic fields was unavoidable. The watch was guaranteed to resist magnetic fields up to 1,000 oersted. Indeed, the word Milgauss means 1,000 gauss (gauss being a measurement for magnetic induction). Magnetic fields can affect a watch's accuracy at just 60 oersted, at 100 oersted the watch will no longer work. The Milgauss overcame the effects of magnetic fields by using anti-magnetic alloys and an iron movement cover.
For further information see: Skeet, M., & Urul, N., Vintage Rolex Sports Models, 2002, pp.90-97.