Okay, so to further the beating of a dead horse, ironically I just this morning got a call from a now new client that further emphasizes the reason for photographers and really anyone to watermark images. I think google will cover the basics of why photographers do watermark their images, but here's a real world example that worked in my favor.
Just this week I returned from a photoshoot in VA where I spent 3 days working with a client on images to be used for their newly opened medical practice. I left them with a series of watermarked proofs no different than the ones I typically post here.
Within hours of my sharing them, they emailed some of my images to a friend who is a vendor of theirs. That vendor liked the images so much they asked my client if they could use them for a project they were working on. Being a larger company they new the legality of things and approached both the doctor who appears in the images and myself who took the images for permission.
Within 20 minutes of starting my morning today I made another sale using the images I already took and by doing so brought on another client. So in a perfect world, watermarking not only protects, but it serves as an advertisement too.
Looking at it another way though, if the company did not see my watermark, or chose to be deceptive about copyright law or just plain not know better (still illegal) they could have snagged my images and used them without permission. Watermarks help insure that from happening and clarity for all.