You will recall from the previous section that there is a "Merge Down" option. This is in the Watermark Text section, there is a similar option in the Watermark Image settings, but it is "Merge All down":

It is important to understand what these do and how they interact. When the [Apply] is clicked the script adds, first, a new layer for the image watermark, and then another layer for the text watermark. Assuming both watermark types are applied, there are four possibilities:
If neither merge option is checked, these layers will be left in the processed version of the image. Any existing layers will be untouched and the watermark layers will be at the top of the layer stack. Note the text watermark is a normal art layer - not a text layer - at this point. (By the way, if you request any repeats, these are initially created as additional layers, but they are always merged into the master watermark layer for text or image.)
If only the watermark text merge option is checked, then the text and watermark layers will be merged. Any existing layers will be untouched and the new watermark layer will be at the top of the layer stack. Note: the new layer will maintain any blending options that were applied to the image superceding any that were applied to the text layer.
If only the watermark image merge option is checked, the watermark image layer will be merged with any existing layers, including the background layer. The watermark text layer will remain as a separate layer.
If both merge options are checked, then the watermark layers and any existing layers will be merged into the background layer.