I'm not too familiar with any programs that are free, I personally use Photoshop for my watermarking, but that's not always an option for most people.
I did a little research to answer this question, and I always thought that Flickr offered a watermarking ability, so I did a test. I couldn't find anything obvious that says Watermark, but what I did find is that Flickr has partnered with something called Picnik and it is what appears to be a very powerful online photo editing tool. And if you look through the various tabs and options, they do have the ability to add text to your image. Which can be manipulated to be a watermark. And once it's saved the text and the image are flattened, and anyone who downloads it or links to it, or saves it in anyway will get the text watermark along with it...
And if you are not interested in posting on Flickr, I recommend utilizing their services, and you can always delete the photos after you've saved it....
Play around with it, it looks fun...
And of course for all you Google fans, you can always try using Picasa, which past experience tells me is a pretty powerful tool, and it's not associated with photo sharing like Flickr is. It's worth a try.
Both options seem to be just as powerful as Photoshop is when it comes to manipulating your photos, and Picnik even has the ability to adjust curves and levels. And what's nice about Picasa is that it works with your photos that were taken in the RAW setting, so you can manipulate the exposure levels and contrast levels as well.
Picasa - free photo editing and photo management software
Welcome to Flickr - Photo Sharing
