To be clear too, watermarking won't stop anyone from taking the images. It will make it much less likely they will use them elsewhere since your mark is on them.
I like the ImageHandler 2 solution since (as far as I know) it's not possible to find the original unmarked image source since it uses it's own cache system, and doesn't require my team to do any extra work preparing images.
Your results may vary.
LinDAvid:
Is there a way to copy protect copyrighted images? I would like to have when they are right clicked they get a message such as "Sorry, our images are copyrighted."
Steven300:
I didn't see post #3 until after I posted so I didn't know of any bypass issues when I was posting. If that's the case, then perhaps watermarking is best.