on the fly watermark with php

[anthony]

Yes. You pipe the image into and out of the command line, using '-' as the filename
for input (pipe in) and output (pipe out to client).

For an example on piping an image out see...
API & Scripting, PHP using commands
http://www.imagemagick.org/Usage/api/#php
and the 'font test' example. which generates an image and pipes the result directly to the calling client.

For non-command line API usage, you basically read and save to 'blobs' which are image files in a in-memory string.