Its pretty self explanatory:

I created an image in Draw.
I clicked File -> Export as PDF
On the 'General' tab I checked the box 'Sign with watermark'
I typed some text in the box labeled 'Text' under the above option
_____

I then changed my mind and unchecked the 'Sign with watermark' box but did so without clearing the contents of the text box first.  The text I had entered was greyed-out and I was unable to change it without re-checking the 'Sign with watermark' option box.  Since the option was disabled I left the text box filled.
_____

I clicked 'Export' and chose a filename and location to save to as is the norm.

When I viewed my PDF the text that I had entered as a watermark before disabling the option, and which stayed in the un-editable greyed-out box, appeared across my image anyway.

To fix this, if I change my mind about a watermark I have to make sure the text box is cleared before disabling the feature.

Conclusion:
It seems that the 'Sign with watermark' check box doesn't so much control the feature, as one would expect, but rather simply controls whether or not text can be typed into the box that the watermark feature reads from. Furthermore one could conclude that the watermark feature itself is controlled not by the state of the "Sign with watermark" check box, as would be expected, but rather by whether or not the 'Text' box sub-option contains any data.