You setup watermarking in Admin => Watermark Options for permanent watermarking, You then set which usergroups get their images watermarked at the bottom of permissions in Admin => Edit Categories as you edit each category.
People can watermark their photos before they upload them to you nothing you can do about that. Now watermarking in Photopost I explained above how to enable that. It looks to me like that user watermarks their photos before they upload them.
Can I set the watermarking to show only if images are shown in a different site but not mine? when people use a link to show photos using my bandwidth, I dont mind, but I want my site name to show on these photos, but not when people see it on my site.
No thats not what I stated above. I said if your using Imagemagick the watermark needs to be a gif image and if your using GD2 it needs to be a png image.
So you should be using a gif image and both the watermark and the data directories at every level need to be 777. You then set the proper path to the watermark in watermark options and turn on watermarking.