To create a watermark:

• Select the picture once you've inserted it (on the Slide Master or on an individual slide).
• The Picture toolbar should appear automatically, but if not, choose View | Toolbars and put a checkmark next to Picture.
• Click the Image Control button on the Picture toolbar (it's the second one from the left). From the drop-down menu that appears, choose Watermark. Voila! Instant watermark graphic.
• If you don't like the effect that watermark gives you, experiment with the next four buttons to the right on the Picture toolbar. You can use them to increase and decrease the contrast and brightness of the picture until you get just the effect you want.