How To: Create Watermark to Protect Images
Open your image in your favorite image editing software - I personally prefer Adobe Photoshop, but this is extremely easy to do with the GIMP and PaintShop Pro as well. If you're familiar with these products, these steps should be very easy to follow.
Create a text layer on top of your image and type in what you would like your watermark to say. Generally, it's a good idea to put your name or the name of your website on it. Make it so it spans across the center of your image. For example, I'll put Amber Neely across mine.
Click any image for a larger view.
A good watermark will also state what you can and cannot do with the image, but be as brief as possible, such as "do not redistribute." Here's what that would look like.
Set your text color to white, and your layer blending mode to screen. Adjust the opacity of your watermark to the point of it being barely visible. For example, my watermark is only at 11% opacity in this image.
If you find that this doesn't offer enough protection (or you'd just like a darker watermark because your image might have a lot of white in it, like mine does) go into your layer styles and add a 1px black stroke around the outside and set the blending mode to multiply. Adjust the opacity of the stroke so it is barely visible.
Remember, a good watermark should be noticeable, but should not detract too much from the image! Here's the finished effect: