Artists are a weird breed.
"I made this beautiful artwork for people to admire. A masterpiece of creativity and craftsmanship. Let me slap an huge, ugly-ass watermark right on top of it."

It should be obvous that whenever someone uses an artwork for anything, they should do their very best to link back to the original source, list the artist(s), clearly state that it's not their own work if that's not already obvious. Anyone on e621 should understand that this is the most normal and reasonable thing to do (because, you know, it's the way this website works), right? RIGHT?

You don't need a watermark which covers a third of the image to do that.
Example: Look at my original character "Donut Steel":
https://puu.sh/AWsp1.png [1]
(unrelated to Aruesso's character "Donut Steel"):
post #231459

Would you rather see all relevant information for looking up more, in a small bar at the bottom, not obscuring and not interfering with the rest of the image at all, easy to remove should you choose to use this as a wallpaper (please do!)?: https://puu.sh/AWsHD.png
Or would you rather see an eye cancer inducing watermark right in the middle of the image, giving you no information except for the artist's name (and you're lucky here because the watermark is actually readable, I've seen some indecipherable watermarks in my days, I mean, are you serious? )?: https://puu.sh/AWspQ.png

Be honest! Nobody wants to see those watermarks. And yeah yeah, I get it, I'm exaggerating. (Or am I ? ? ? ) But it's really frustrating to see great artwork which would be perfect as a wallpaper but has a very noticable watermark in a place where it can't be shopped out easily.
Example:
post #202981
You would have to crop this image in an inefficient way or be very good at photoshop.
Here are some examples of artists getting it right:
post #277093 post #663293 post #808316 post #7065
There is also this:
post #327437
It's not idal but also not too bad because the text is out of the way in an area where nothing else is going on anyways.

If you're going to tell me "but if the watermark is easily removable people are going to steal my art": Read again. It should be the most normal thing in the world to properly give sources. Removing watermarks/signatures from art and repost it as your own is copyright infringement. People who do that are assholes and should be (and can be) dealt with accordingly.
Slapping a watermark on your artwork is only going to stop someone from trying to steal it when the watermark is so huge that working around it is impossible. But at that point the artwork is ruined anyways.

I'd also like to lose a word about roleplaying and similar stuff. Let's do a little thought experiment.
Think of a scenario: A nice beach. A beautiful character is sitting at a beach bar, sipping on a drink. Imagine yourself joining this character to also have a drink (and for the sake of not making this creepy, keeping it at that). I don't pull this from thin air. People do this all the time.
Some inspiration:
post #1521230 post #1428154 post #1329573 post #940686
Let's make that obviously roleplay: Act this situation out with another person on a publicly accessible website. Clearly not OK for some character owners.
Now make it obviously not roleplay: Just think about the scenario in your head. Clearly this could not possibly cause any discomfort for anybody else, let alone the character owner.
So going from "just in your head" to "public", at what point does it become a problem for the character owner? Once you start writing it down on a piece of paper? Once you start talking to a friend about it? Once you save it as a word document it in your DropBox?
I am assuming proper sourcing, of course. And in this case it would be sensible to explain the context: "The character owner, <insert link here>, is not affiliated with this roleplay in any way."
You will find that drawing the line anywhere here is completely arbitrary and barely, if at all, rationally explainable. I get the point SnowWolf is trying to make. Maybe the caracter owner simply doesn't like the thought of their character being used in roleplay by other people. But then, why? I would be honored if somebody wrote a story with Donut Steel (please do!). Maybe that person imagined Donut Steel drinking whiskey in that scenario. I'd say "well, I'm against drinking alcohol so that's not how I see my character", but I'd want you to be able to share that story with others. It's your story. You made it. As long as you don't pretend that it's your character I don't have a problem with that.
But maybe I'm just too much of a programmer to understand how artists think. (I.e. I use other people's programs for free and I let other people use my programs for free.)

[1] If a ≥ Privileged reads this: Would this get approved if I uploaded it? It's technically not a screencap, it's 3D-rendered. You can find some comparable stuff here: https://e621.net/post/index/1/3d_(artwork)%20-animated%20order:score_asc

tl;dr:
distracting_watermarks are annoying. Don't do it.
Fight copyright infringement with law, not by ruining your art.
Always provide sauce.