Enter the point size you wish to use. This should be chosen to work with the resolution you have your images set at. Normally, my images are at 300 DPI, and I use 6 point text for my signature. As the resolution decreases, so you will need to increase the point size of your text (because a smaller DPI represents a larger physical print when output). This is for the web-sized images that I use in my galleries (long side 720 px), for larger images, you'll probably want to use larger font sizes and need to increase the offsets so that the text doesn't run into the edges.

Offsets are used so that the signature text does not run into or beyond the edges of the image. I suggest you start with the values of around 20 for x and y experiment to see what you like. The x offset adjusts position from the sides of an image for the horizontal text options; the y offset affects distance from the top and bottom edges. This is reversed for the vertical text options.

The flatten option determines whether the text layer (and any other layers in the document) will be merged together.

Effects

I've experimented with different options for layer blend modes and other properties, and decided most of them either had no effect or wouldn't work well in this context.

Luminosity is my favourite. It uses the colour in the images underneath the signature to colour the text and the brightness of the text colour. Here are a few examples:

This is normal mode with no effects

This is with luminosity checked using a 3/4 tone gray colour for the text

This is with luminosity and outer glow