as it is applied to images, steganography is hiding data within the image without visibly changing it. it can be any data: text, numbers, message, another image. it can be achieved in various ways - too technical to even try to explain in plain words. when you have the key, you can extract the data (watermark in this case) - and restore the original image (that is done thru software). otherwise the embedded data persists, even as the image is manipulated. so for those who know how the watermark was created, it is possible to examine the image to determine whether it has a watermark (to determine a violation of user license, for example).
and it is impossible to remove the watermark, unless you had the key. e.g. it can involve pixel manipulation during image compression that does not visibly change the image itself. the reg user would not be aware that there is a hidden watermark at all.
so it makes it possible to track the secondary,tertiary,etc image to the original image, that was watermarked.
there's some interesting history on wiki and more, if you need:
http://en.wikipedia.org/wiki/S...
