I've recently become aware that one of my photos has been used by a national newspaper beyond its licensing terms (cc-by-sa-2.5, used without the required credit), and whilst I can pursue them for some compensation, I was wondering about how effective watermarking is as a deterrent for the future? After all, if somebody has little regard for copyright, what's to stop them cropping a watermark out?
I think adding your copyright info to the meta of the images is more important than a watermark. I understand both sides of the "to watermark, or not to watermark" discussion, and both have valid points.
But more important is that you should always added copyright and contact info to your file's meta data. There's really no excuse not to - it doesn't detract from the image at all, and it's fairly easy to do in a batch process with Photoshop, Bridge, or even Lightroom.
Of course, if you don't mind people using your images, well then don't bother. But if you do, there's no excuse for not having your copyright stuff in the file meta.
I'm not really sure, but I think that might even go further in a litigated case over copyright infringement, if it can be shown the violator's file has the meta there and they ignored it, that's pretty hard to fight from their side.
I think probably they do deter misuse. Psychologically, using an plain image without credit is a different beast than using one with COPYRIGHT ROLAND SHAW staring you in the face (or taking active steps to remove the watermark). Also, there's more opportunities for people in the chain who might not otherwise think of it to say "hey, do we have permission for that image?", and I think there's a good chance the situation you describe is due to ignorance rather than active malice ("all images on the Internet are free, aren't they?"). And if there's no watermark, it's easier to rationalize, e.g. "we'll talk to him later" and then forget about it.
On the other hand, I've never seen a watermark that didn't look awful, detracting significantly from the image. Perhaps it can be done "tastefully and artfully", but I've never seen it. So it's a tradeoff.
I am generally of the opinion that people with no respect for copyright will continue to ignore/subvert any deterrents that you use. If they can see it, they can steal it.
Watermarking, however, can be used as a marketing tool, and as long as it does not detract from the image itself it is completely valid.
As far as tracking down usage, there are lots of other tools, including Exif data or image tracking services like Digimarc, that you can use to discover infringement.
I think watermark, if done tastefully and artfully is worth it, perhaps not as a deterrent for copyright theft, but so if your images are seen, that it properly gets people to look you up. Yes they can crop out the watermark, but if you can prove that, then you probably can increase the damages awarded.
I also think that a well done watermark enhances an image, much like a well done image border, but that is clearly personal preference.
If you do portraits and the like, and you offer online proofs, I'd definitely put a big "PROOF" watermark across the image.
I must say that watermarking when done tastefully doesn't detract from an image. I personally think the most unobtrusive way to do it is to have a simple translucent white logo in the corner, roughly 10-15% of the width of the photo.
An example (of a friend's work) would be something like this: http://www.flickr.com/photos/teddibrice/4629473858/ though you could go further and simply stick it right against the edge.
You see it but it doesn't yell at you and gets the point across that this is their photo.
The most tasteful "watermarks" (if they can be called that) that I have seen are actually more akin to the postcard-style advertizing you sometimes see from studios. What I'm thinking of is a moderately translucent stripe that goes across the photo, often at the line 60% of the way down the photo - although a vertical stripe works too. The stripe is usually at something like 20% translucent (rather than the typical "watermark" which might by 90% translucent).
I'd be interested in other opinions.