I think he wants the watermarked images to be generated as opposed to having to be manually created.
To answer the OP: There seem to be a number of different ways to overlay or blend images. This is probably the most appropriate solution:
http://www.imagemagick.org/Usage/compose/#blend_use
Feed the images through a script, as suggested, but you only need to return the image location, not pass through the entire image, and have that location be to the watermarked version. If none can be found (-e $basepath), have the script blend one using the non-watermarked version + your watermark image.
I'd supply specific code, but I'm not very familiar with this particular library, I generally do my image manipulation with GD in PHP (ironically, the ImageMagick site is also written in PHP...)
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