Yesterday I was at a short talk on watermarking. Thought of checking out some recent work on the subject. And I was think how I am going to explain it to someone who is not interested in technical stuff. Following description is adapted from a relatively old paper with the usual security characters:
Data hiding aims at enabling Alice and Bob to exchange messages in a manner as resilient and stealthy as possible, through a medium controlled by evil Mallory. Alice and Bob don't care if Mallory see the hidden message.
On the other hand, digital watermarking is deployed by Alice to prove ownership over a piece of data (a music album, movie, photo, document, etc), to Jared the Judge, usually in the case when Tim the Thief benefits from using/selling that very same piece of data (or maliciously modified versions of it). In order to convince Jared, the piece of data should have something unique that only Alice can show its existence (Ideally, Alice should be able to challenge Tim to show how to get that unique thing from the data; Tim fails to do so since he does not possess a secret that only Alice knows. This will impress Jared more about Alice's claim and Jared is most like to send Tim to jail.). Jared does not care what that unique thing is - it just needs to be unique. To be effective, Tim should be able to remove that unique thing from the piece of data (better if Alice can prove if Tim tried to tamper the piece data). For a usability point of view, that unique unique thing that Alice has attached to the piece of data should not affect the quality or any other desirable property of that piece of data.
Now in another scenario, Alice wants to send a message to Bob through a communication channel controlled by Eve and she want to hide the existence of that message from Eve (not even want to show the cryptic message which Eve cannot decipher anyway). So, Alice uses stenographic techniques here. Unlike watermarking, here the hidden message is the main data. Alice takes some public piece of data (e.g. an image) and embeds the message. For Eve, it looks all normal. Alice and Bob shares a secret so that once Bob gets the public piece of data, he can extract the hidden message. It would be even better if Eve cannot know if a communication took place between Alice and Bob. In certain situation (like in a war) knowing that two parties communicated with one another could be valuable information.