A Water Mark is like the water embossed mark on high quality writing pager that one could see if the paper was held up to the light. In a PDF the water mark is in a special layer and one can set the transparency of the mark and whether is on top of or behind the context and from layers. The water mark has limit placement and size options and cannot be resized, moved or rotated.
Annotation stamps are like rubber stamps but it can be resized, rotated and moved as needed.