Here are examples of watermarks. The ones with text are typical of what's available in the watermark gallery in Word 2007. The one with the graphic shows how you might customize a watermark to use a picture you specify.
Once the watermark's inserted, you can see it in Print Layout view, in print preview, or in the printed document. As this indicates, watermarks are intended for printed documents — they will not show up in the Web Layout view of the document, which is the view used if you post the document to a Web site.
If you want a watermark that's not in the gallery, you can create a custom watermark. See how in the next section.