To create a watermark in Word 2007 you have to do the following: 1. Go to the Page Layout Tab. 2. Click on the Watermark option and select a watermark from the available template i.e. Do not copy and Confidential. 3. If you want to set your own text as a watermark then click on the custom watermark option and then select one of the radio buttons which are Picture watermark and Text watermark. If you select the Picture watermark you can select an image from your system and set it as a watermark. If you select the Text watermark then you can type your text in the field provided and tweak some of the options available and set it according to your need. 4. Click on Apply and then OK. After following the above steps you will be able to create a diagonal or horizontal watermark.