The basic understanding of a watermark, is a design impressed
on the paper pulp in a semi wet state, by the use of a
cylindrical cage (dandy roller) with projecting designs, that, in doing so,
leave areas of the paper (the design) with a deeper density
of paper that is generally not visible to the naked eye, until
immersed in water.
The mark is generally soldered onto the cage before paper
production, to suit the purchaser of that particular
production lot.
I first became aware of them when I was a kid, seeing designs
visible in aerogrammes, and quality note paper
(Basildon Bond etc)
It's fairly hard to come across pictures of dandy rollers,
there is a description here that makes good reading
http://freepages.genealogy.rootsweb...Heinecke.htm