Watermarks are fine as long as you don't care where you images get used on the net or the person just does not take the 5 seconds to clone out your watermark. There are digital watermarks and services to track where you images show up on the net, but they are really expensive. While using Flash will keep the average person from stealing your images, any one that really wants them can still grab them with just a screen capture. On the other hand, I've not had great success using .htaccess on mine site.
For me, using a watermark that does not impede viewing of the image seems the best way to go. From my research, be limited, if the watermark looks nice and does not cover large portions of the image, people are inclined to leave it there. Then if they use it, at least people that see it will know about you.
You could spend hours and hours each week trying to police your images, but is it really worth the time?
I walk a lonely road
The only one that I have ever known
Don't know were it goes
But its home to me and I walk alone