biggrasp, the purpose of watermarking is to prevent someone from making profit or taking credit for a picture that you created. Watermarking it is still not going to keep people from using your pic, even if the watermark is clearly on the pic.
Any photoshop software will allow you to watermark pics. Photoshop software, however, allows you to size, color, change their file type (bmp, jpg, etc), and basically clean up a photo for your personal use. I use Adobee Photoshop 7.0 to create pics & captions here. You can find free photoshop software that will do the basic stuff ... check out this link:
http://www.avs4you.com/AVS-Image-Converter.aspx