Watermarking embeds a digital signal in text, image, audio or video files, which may contain information and proof of rights to a product's owner or publisher.
www.europe4drm.com/l_menue/glossary/glossary.htm
That said, people can steal still your photos, and edit them a little bit or crop them or whatnot to avoid the watermarking. If you put any picture on the Internet, there's not too much a skilled Photoshopper can't do to clean it up.