In digital security and authentication, watermarking has emerged as a solution to unauthorized digital copies, monitoring of broadcasts, information embedding, as well as end-user and transaction authentication. In the field of watermarking, the discrete cosine transform (DCT) domain, as well as other transform domains, have been shown to be advantageous over most spatial domain techniques by its increased robustness to image processing operations and possible distortions. In this research an adaptive watermarking scheme and its implementation are investigated in images in which the watermarks are embedded in the discrete cosine transform domain. The adaptive scheme has an advantage in that watermark strength can be adjusted according to image characteristics. In addition, the watermarked image degradation is also analyzed. Finally, the system's resistance to attacks is demonstrated.