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Many people object to watermarked images, feeling it detracts from the artwork. This is a reasonable position, but there's no reason that a watermark signature necessarily has to be obtrusive.
By using layer styles (if you have Photoshop 5.5+) or simply adjusting the opacity and color of a layer (using any graphic manipulation program that uses layers and allows adjustment of that sort), you can create a distinctive and subtle signature watermark.
As for what to use, that's really up to you. My personal watermark signature is also my digital art logo, and it's constructed from a specialty font. I simply settled on the design I wanted to use, made the font black on white, then made a Photoshop brush out of it.
The possibilities are almost endless. You can use shapes, fonts, various kinds of symbols, even a hand-drawn signature which you convert to a brush or shape (so that you can easily re-apply it when you need it). If all else fails, you can simply type what you want on a text layer and use that.
Once you've settled on a design, you'll be ready to start experimenting with layer styles and opacity settings and so forth.
Probably the simplest thing as far as watermarking goes is to put your mark on a transparent layer in a color that's a bit darker or a bit lighter than the area you want to mark, and then simply adjust the opacity until you get a nice blend that is visible but not obtrusive.
You can also try experimenting with layer blend modes. Overlay, Screen, and Soft Light are all good candidates for blending a nice, smooth watermark, and in some cases, Multiply is also a good option. Don't be afraid to try different options (if you're worried about not being able to go back to a style you liked, duplicate the layer and make the original invisible, and tweak the copy).
Layer styles are an excellent way to save your settings for future use, and the options are considerable. Set the Fill for the layer to 0% and you can have tremendous control over the look and feel of the watermark. Try using a Drop Shadow (adjust the size and depth, and possibly the opacity or color), Stroke (1 px, outside, low opacity), and possibly Color Overlay, again experimenting with the blend modes to see what effects you can get.
One look that I like is a “transparent” bevel (small size, low opacity, sometimes with a drop shadow for extra emphasis), or a simple light-colored Color Overlay set to Soft Light, with a stroke around the edges.
Sometimes I've even used a custom gradient to fill the watermark, usually with colors I pick from the image with the Dropper tool.
You can also sometimes employ an Outer Glow at a low opacity or special blend mode, to make the watermark stand out from the background very slightly.
The key here is to play and experiment. That can't be overstated enough. The only way to find out what will look good sometimes is to just tweak and adjust until you get something you like. And when you do, consider saving the style for future use.
Feel free to use, tweak, and experiment with the layer styles included with this tutorial (one zip is for Photoshop 6 and has fewer styles; the other is for Photoshop 7+). Change the colors, adjust the parameters, etc. Sometimes taking something apart is the easiest way to learn!