Watermarks are small branding messages placed over images which ensure that they'll be attributed to you when people use them on other sites.

At Admin -> Settings -> File Settings, you have an option "Watermark Images?" When you set that to yes, several more options appear below where you can choose a text or image watermark, which corner of the image to put it in, etc.

Assuming you have the "Keep Watermark on Large Thumbnails?" option set to yes, watermarks show on all thumbnails and image downloads. But sometimes a situation may arise where you want to offer an unwatermarked version of the image to certain people. The most common situation would be offering an unwatermarked, higher resolution version to people who buy it. When you have prices and sales switches on and the particular listing has a price specified, WSN Gallery will automatically remove the watermark when it's purchased. (You can also use Admin -> Revenue -> Sales Settings -> "Prevent Hi-Res Downloads?" to control the size until they pay.)

But what if you want to offer an unwatermarked download on a free listing? You can just tack on &unmarked=1 to the download URL to get an unwatermarked version. If you want to prevent people from potentially exploting that loophole on their own, you can disallow that parameter in the file settings.