I assume you refer to digital watermarking. This refers to embedding some date into a picture that can be used to identify pictures or track where other (modified) versions of a picture originate from. Digital watermarks could tell a printing service for example that the picture is not licensed for printing. It is also a tool to prove ownership of pictures (assuming that only the owner can provide the opriginal picture with the watermark completely removed). They are one example of DRM (digital rights management) methods.
Digital watermarks are embedded in (more or less) "invisible" ways into the pictures. Some schemes won't affect the image information at all, but those are trivially defeated (e.g. by converting the image file to a different format). Robust watermarks have to survive format conversions as well as transformations such as scaling, rotating, cropping, etc.
Watermarks that don't grossly deteriorate the image are usually easy to remove if the algorithm used is known - one reason why there's a lot of secrecy about commercial solutions. I've got a version of Photoshop Elements that came with a watermark decoder.
Here's one commercial supplier of watermarking systems:
http://www.digimarc.com/watermark/
Most of us just add our signatures on the photo itself, some on the important parts and some just where they deem fit. It's easier too I guess compared to the other method of watermarking it digitally.
