DetailsPlease check the below points:-
1)This extension watermark the images placed inside your magento/media/watermarking/sourceImages.2) Please give the opacity of watermarking image from 1 upto 100.
3) you can set the watermarking images position by giving the hirizental and vertical distances in px.These distances will be measured from the borders of the source images.
4) If no horizental or vertical distance is given then the watermarking image position will be centered by default.
5) Watermarked images will be stored inside your magento/media/watermarking/watermarked folder that will be created at run time,there is no need to create it manually.
6) Only jpeg,gif,png images are allowed to watermark and as source images.
7) If there is any error then you can see the list of files that are not watermarked in log.txt file at media/watermarking/log.txt.