Begin by opening GiMP (in this example I am using v. 2.6) and using it to open the image you wish to watermark. You will want to bring up the Layers dialogue box by pressing ctrl+l if it is not already visible. Once you have the image and the layers dialogue box open we are ready to begin.
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Create a new layer up from your background layer by clicking the icon that looks like a blank sheet of paper on the bottom left corner of the Layers window.
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Next name the layer something useful I called mine Watermark and set the Layer Fill Type as Transparency.
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Click on the new layer to select it and then select the Text Tool from the tool bar.
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With the Text Tool selected click anywhere on the image to create a text box. The GIMP Text Editor will appear. Enter whatever words you wish to have as your watermark into this box. It is a good idea to place this over one of the busier parts of the image or make it very small and hide it somewhere surreptitious. Either of these strategies can help ensure that your photo stays your own.
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Once you have entered the text into the Text Editor window you can manage options like font size and color in the text properties dialog which is located below the main tool selector. I set mine to be a large font (size 74) with white letters.
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Now that you have created your watermark text go back over to the layers window and click the eye next to your background layer to make it invisible. Now you should have 2 visible layers. Right click on the text layer and select merge down to merge it with the Watermark layer. When you are done you can click the eye logo to make the background reappear. Make sure you have hidden this layer before merging down otherwise you will merge all three layers.
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Finally click the Watermark layer and above it you will see a slider bar to control the opacity level. Move this bar to the left and watch your text gradually fade. I would not recommend going 7-10% opacity in order to make sure the Watermark remains visible to a certain degree.
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Finally go up to the file menu and choose save as. I would save the image as a jpg file. This will give an error saying you need to flatten the layers, it is ok to proceed and most of the default settings should work just fine.
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Youre finished! You might want to play with different opacity levels to decide how visible of a watermark you want.
Here are a few different versions of the same watermark with different opacity levels for your comparison:
