As an affiliate, watermarks are a possible leak. While I see how this is good, and even needed, for the sponsor, in the end of the day, making it easier for people to type in your domain name after they've been introduced to free pics, means the sale doesn't get credited to the affiliate.

I do see the need in watermarking though. As an affiliate, a small watermark with sitename.com is ok. The one place where this gets crucial, is if I want to use the content for galleries or freesites. I have approached sponsors in the past and asked for non-watermarked sets just for that and that usually worked.