A watermark is a communication layer. It tells the reader how to treat the document before they read a single paragraph. "DRAFT" prevents an unfinished file from being treated as final. "CONFIDENTIAL" reminds people not to forward casually.
Watermarks are not security. Anyone with editing tools may still remove them. For real access control, use password protection as well. But for day-to-day review workflows, a visible watermark often prevents mistakes.
Use Watermark when sharing proposals, contracts, mockups, internal policies, or client drafts that need clear status on every page.