I think watermarking is an excellent idea, particularly for the last reason that Jaci mentioned. But, that said, I don't watermark mine - mostly out of laziness and because unless the watermark runs right through the image, it can almost always be removed. And I don't like running marks through an image.
I do, however, superimpose the Cookie Connection logo, and sometimes my own, on the banners that I send out related to the site or my work, just to reinforce these brands - basically watermarking. I usually locate the logo off to the side of any primary images though. I had a transparent gif/png made of my logo (so it can easily be superimposed without the background of the image showing) and then I just overlay it in Photoshop. There are options to adjust the transparency of any overlaid graphic or imagery in Photoshop. I use it for all of my photo-editing actually - image exposure and color adjustments, image size adjustments, cropping, layout, watermarking, etc.