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With an image and separate watermark, the thief can still go in the source code and download the actual image without the watermark.

Dividing the image into segments is quite a hassle to download and put back together, but it’s also a hassle to create (cutting it up and putting every segment on the site). And without a watermark over it, Mr. Thief can just take a screenshot and crop the image.

Having the watermark as part of the image, it’s impossible to separate the watermark from the image, so there’s no way to get a clean image — not by saving it, not by looking in the source code, not by taking a screenshot.

This is how stock photo companies do it, like iStockPhoto. If you look at any photo on their site, there’s really no way an image can be taken without having the company’s logo included in it (example: here). You’ll have to clean it up really well in Photoshop if you want the actual image.