The practical application of watermarks in today's digital world will revolve largely around music and video. With MP3s and DVDs becoming the standard, watermarks will be used to ensure copyrights are enforced. Because most modern media uses compression in one form or another, it is important to know how watermarking and compression interact.
Cleartext marking works by embedding a watermark into the original signal during decompression to output. For example, if you were burning a selection of MP3s to a normal, uncompressed CD format the watermark would embed itself during the decompression/writing process. Cleartext watermarks are designed to survive a variety of processes, which makes them suitable for identification. However, retrieving a cleartext watermark is very complicated and usually involves a proprietary mechanism (hardware or software) of some sort. Because of this the decoding mechanism can be reverse engineered and the watermark removed or disabled.
Bitstream-marking algorithms manipulate a compressed digital bitstream without changing the basic structure of the audio or video stream. Bitstream marking uses a low-complexity algorithm and can be used to carry transaction information. This means the watermark signal is unrelated to the media signal. However, these watermarks cannot survive digital-to-analog conversion, and are generally not very robust against attacks. They are particularly susceptible to collusion attacks. This type of mark can easily be extracted by clients, and is appropriate for gaining access to content. Bitstream watermarking is an example of a security measure intended primarily to "keep honest users honest."
Integrating the watermarking algorithm with a compression algorithm avoids creating a conflict between watermarking and compression algorithms. This method creates improvements in hiding data imperceptibly in content and can lead to improvements in the perceptual compression algorithm. It also reduces the complexity of this type of watermarking. Integrated marking algorithms do alter the semantics of the audio or video bitstream, increasing the resistance to collusion attacks.